Mumbai (Maharashtra) [India], October 1(ANI): Supported by strong momentum in the first half of the fiscal year, India's economy is on track to achieve a 7 per cent growth rate, even as inflationary pressures and monsoon deficiencies present fresh macroeconomic challenges. 

Speaking exclusively to ANI, Dharmakirti Joshi, Chief Economist at Crisil, detailed the growth trajectory alongside emerging risks on inflation and the agricultural front.

Reaffirming the upward revision in growth forecasts, Joshi pointed out that the domestic economy opened on a solid footing before facing a moderate second-half slowdown. 

'The first half is looking very good. The second half might be a little slower, but I would say that somewhere around 7% is the likely outcome for this year,' Joshi said.

However, robust economic expansion coupled with rising global and domestic cost pressures is expected to prompt monetary tightening. Anticipating a shift in policy direction by the central bank, Joshi predicted an imminent rate increase. 

'With strong domestic growth and global interest rates moving up, a mix of all these factors tells me that the monetary policy cycle will turn, and we should see a rate hike in the coming policy meeting,' he noted, specifying that he expects a 25bps hike.

This anticipated policy response comes against the backdrop of mounting inflationary risks stemming from elevated global crude oil prices, surging corporate input costs, and weather-induced disruptions. 

'There is stress on the inflation front, but overall inflation is still contained as per the latest print. However, input costs are rising, and some companies have begun passing that on to the end consumer,' Joshi explained, adding that crude oil forecasts have been revised upward amid a global oil crunch.

A primary driver of headline inflation concerns remains the uneven monsoon performance, particularly given the onset of El Nino conditions and widespread rainfall deficits across several states. 

'At the beginning of the year, the Met Department forecasted that it would be a deficient year, and it has actually turned out to be deficient. The risk has now become the baseline,' he observed.

Despite these agrarian headwinds, Joshi emphasized built-in structural cushions that prevent a full-blown agricultural crisis. 

'About 40% of agriculture is non-crop, which is quite resilient even to deficient rains. Additionally, we have food grain stocks to help control prices, and the irrigated area is much higher now than it was earlier, at around 59%, which cushions against the impact,' he stated.

Addressing administrative measures to rein in Consumer Price Index (CPI) and Wholesale Price Index (WPI) inflation, Joshi urged a strategic deployment of existing buffer reserves. 'To control prices, rice and wheat stocks help, and there is also a dedicated Price Stabilization Fund that should assist if things worsen. However, it is not a panic situation,' he noted, emphasizing that downside risks remain manageable through timely intervention. (ANI)