New Delhi, Aug 30 Chief Economic Advisor V. Anantha Nageswaran has said that the festive season and the Goods and Services Tax (GST) reforms could increase domestic demand in the upcoming quarters.
Short-term risks to economic activity, particularly exports and capital formation, remain due to uncertainties from the 50 per cent US tariff that was imposed on August 27, he said.
Nageswaran added that adequate domestic consumption would encourage private players to continue investing, even during challenging times.
Following the release of GDP data, which revealed a 7.8 per cent growth rate in the June quarter, exceeding expectations, Nageswaran said the growth is expected to stay within the targeted range of 6.3-6.8 per cent this fiscal year, as projected in the Economic Survey earlier this year.
He ruled out any revision to that growth figure, despite concerns over US tariffs. "It is too early to gauge the precise impact of the US tariff on the Indian economy," he said.
A senior finance ministry official said that manufacturing, construction, and services drove supply-side growth. Private final consumption expenditure grew by 7 per cent, and gross fixed capital formation increased by 7.8 per cent, which drove the demand-side growth. The government's capital expenditure also significantly contributed to investment growth.
Private consumption's share of GDP for the three months ending in June was the highest for that quarter in 15 years.
High-frequency indicators for July indicate that the economic momentum from the June quarter is continuing, according to CEA Nageswaran.
India not only remains the world's fastest-growing major economy, but also widened the gap with others, according to the latest data. China recorded a growth rate of 5.2 per cent in the June quarter, followed by Indonesia at 5.1 per cent, the US at 2.1 per cent, Japan and the UK at 1.2 per cent each, and France at 0.7 per cent.
A report from SBI Research earlier this month indicated that a consumption boost of Rs 5.5 lakh crore will generate an additional Rs 52,000 crore in GST revenue in FY26, easily offsetting the projected revenue loss of Rs 45,000 crore from GST 2.0 reforms.
GST 2.0 reforms could unleash a consumption boost, resulting in higher tax revenue, lower inflation, and higher growth, the report noted.
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