India is recording relatively rapid growth in the midst of global economic turmoil. This is not to deny that the country faces its own set of challenges. One big challenge is that post-pandemic consumption growth has not been broad-based. While the urban area has been showing strong pent-up demand, specifically coming from higher- income households, rural demand remains relatively muted. This year’s poor monsoon rainfall has further jeopardized a rural consumption recovery. Overall, kharif season foodgrain production is likely to be lower by 4.7% year-on-year (as per first advance estimate), with lower production estimated for rice, pulses, coarse cereals and oilseeds. Inflation in some basic food items, like cereal and pulses, is already quite high. Weak agriculture production could further exacerbate inflation in these items. This in turn will have adverse implications for a broad-based consumption recovery.

The other major concern is around a pick-up in private investment. So far, the investment push in the economy has been mainly led by the government. The Centre’s and aggregate states’ capital expenditure (capex) have grown by a staggering 49% and 43% year-on-year respectively in the first half of 2023-24. However, the subsidy burden on the government has been increasing. There has been a higher outgo towards fertilizer and petroleum subsidies, even though........

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