By laksh5382 
Sonal Verma, Chief Economist (India & Asia, ex-Japan), Nomura, shares her views on the Indian economy in 2024 and what the prospects are for it in 2025. Part:
What has been the biggest disappointment of calendar year 2024?
The current stagflation is a mix of low growth and high inflation, which fundamentally restricts any policy flexibility to respond.
Everyone says consumption has gone down. What is your Opinion?
Softening of income growth and slow job creation, I would say, are the primary factors.
We have seen this year that pent-up demand has subsided and some of the trend has normalized below the range of what we had seen in the last two years. Additionally, there are some cyclical factors that are impacting this trend. In particular, the availability of consumer credit has declined, which was a regulatory decision to control broader financial stability risks. Some of these loans were probably being used to purchase low-priced consumer discretionary goods.
Second, income growth appears to be slowing. In India, we do not have very good proxies for urban wage data, but we use some estimates, for example, employees and salary expenditure of listed non-financial companies. It was growing in double digits, but has now come down to between 6 to 7 percent. If you adjust for inflation, the real increase is lower. There has been a decline in salary increment even on nominal basis.
Third, the extent of job creation has been very low even in this recovery cycle.
What’s the big thing you can expect in CY2025?
The biggest risk we see right now is really on the growth front. There is a lot going on in terms of the impact of monetary policy. We think our potential growth is 6.5 to 7 per cent and our aspirational growth is closer to 8. Over the next 6 to 12 months, we will also lag trend growth – this will be the biggest risk in our view.
On the other hand, the commodity price outlook under Trump 2.0 could potentially be positive for India. That is, if indeed the US moves towards increasing oil production, we could see a decline in oil prices, which could be a source of deflation going forward from India’s perspective, and even Indian reserves. Even the bank, which is very helpless to reverse it. Monetary Policy Course; We believe that the extension of policies into 2025 will be a positive surprise.