India set to conclude FY24 with robust growth: Finance Ministry

India is poised to conclude FY24 with robust growth and macroeconomic stability, according to the finance ministry’s latest Monthly Economic Review. However, potential risks include inflation and external factors impacting the rupee.

In its October economic review, the ministry mentioned that the fuller transmission of monetary policy might temper domestic demand. Nevertheless, India’s growth in FY24 is anticipated to outperform other major economies despite the Reserve Bank of India (RBI) maintaining the repo rate at 6.5% during its October meeting.

Fitch Ratings retained its growth forecast at 6.3%, citing India’s resilience despite tighter monetary policy and export weaknesses. S&P Global predicted 6% GDP growth for FY24, with prospects deemed strong for 2024-2026. 

Buoyant tax collections have provided fiscal space for increased spending, exceeding budgeted estimates due to robust economic activity.

The review highlighted that the rupee depreciated 1.81% against the dollar in the last 12 months, increasing costs for foreign currency borrowings and imports. Policy measures and the transmission of monetary policy tightening were credited with helping control inflation, with both the Consumer Price Index (CPI) and Wholesale Price Index (WPI) showing moderation.

Retail inflation dropped to 4.87% in October, within the RBI’s comfort zone of 2-6% for the second consecutive month. Wholesale inflation remained in the deflationary zone at -0.52% in October. Despite global factors, India’s growth experience in FY24 is expected to be positive, owing to sustained focus on public investment and advancements in digital infrastructure.

The review noted that the government is on track to achieve the budgeted deficit target for the fiscal year, maintaining an emphasis on capital expenditure. The recent decline in global crude oil prices is seen as removing a potential impact on public finances.

Source: Mint