India to hold position as the fastest-growing major economy in FY24: Survey

This forecast is driven by increased government spending in the lead-up to the general election scheduled for May 2023

September 27, 2023

India's economy is projected to expand by 6.2% in the fiscal year ending in March 2024, followed by 6.3% growth in the subsequent year

The forecasts for the current fiscal year exhibit a wide range, spanning from 4.6% to 7.1%

Following an impressive 7.8% expansion in the last quarter, economic growth is anticipated to moderate to 6.4% in the current quarter

India's retail inflation is expected to average 5.5% for the current fiscal year and 4.8% for the next

India is poised to hold its position as the fastest-growing major economy in FY24, driven by increased government spending in the lead-up to the general election scheduled for May 2023, according to a recent Reuters survey of economists.

In recent years, the government has ramped up spending to bolster infrastructure development, including roads and railways, which has helped India maintain its economic growth despite the global economic slowdown. 

The survey indicates that India’s economy is projected to expand by 6.2% in the fiscal year ending in March 2024, followed by 6.3% growth in the subsequent year. These figures align with the predictions made in the previous month. However, the forecasts for the current fiscal year exhibit a wide range, spanning from 4.6% to 7.1%.

Following an impressive 7.8% expansion in the last quarter, economic growth is anticipated to moderate to 6.4% in the current quarter and then decline to 6.0% in the October-December period, ultimately slowing to 5.5% in early 2024.

In response to an additional question in the survey, most economists (22 out of 36) expressed concern that the risks to their GDP growth forecasts for the fiscal year 2023/2024 were tilted towards the downside.

The survey indicated that India’s retail inflation is expected to average 5.5% for the current fiscal year and 4.8% for the next, surpassing the Reserve Bank of India’s (RBI) medium-term target of 4%. More than two-thirds of economists (23 out of 34) believe the risks are skewed towards higher inflation.

Despite expectations that inflation may not meet the RBI’s target in the near term, economists anticipate that the central bank’s next move will be a rate cut. Nearly 60% of economists (28 out of 48) forecast a rate cut by at least 25 basis points before July, with the median prediction placing it at 6.25% in the second quarter of the following year. This aligns with the anticipated timing of rate cuts by central banks in other countries.

All but one of the 71 economists surveyed anticipate that the RBI will maintain its key repo rate at 6.50% after its October 4-6 meeting, with one economist expecting a 25 basis point hike. Median forecasts indicate that the rate will remain unchanged for the rest of the fiscal year.

Source: Economic Times

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