September 22, 2023
The revision was due to increased government capital expenditure, improved balance sheets of Indian companies and banks due to reduced leverage
Other factors for the growth include lower global commodity prices, and the potential for increased private capital expenditure
In FY23, the Indian economy expanded by 7.2%
Private Final Consumption Expenditure (PFCE) will grow by 6.9% in FY24, compared to 7.5% in FY23
The growth forecast for India’s FY24 real GDP was revised to 6.2%, as opposed to the previously expected 5.9%, according to a report from India Ratings and Research. The agency attributed this revision to several factors, including increased government capital expenditure, improved balance sheets of Indian companies and banks due to reduced leverage, lower global commodity prices, and the potential for increased private capital expenditure.
However, India Ratings also pointed out several constraints on Gross Domestic Product (GDP) growth in the current fiscal year leading up to the general elections. These challenges include a slowdown in global growth, which has impacted Indian exports, tighter domestic financial conditions increasing the cost of capital, a deficit monsoon, and sluggish growth in the manufacturing sector. Experts mentioned that all these risks will continue to exert pressure, limiting India’s GDP growth to 6.2% in FY24. Additionally, quarterly GDP growth, which reached 7.8% in the June quarter, is expected to decelerate sequentially in the remaining three quarters of FY24.
It’s worth noting that in FY23, the Indian economy expanded by 7.2%, while the Reserve Bank of India (RBI) expects the real GDP growth rate to reach 6.5% for FY24. India Ratings pointed out that consumption demand is not evenly distributed, estimating that Private Final Consumption Expenditure (PFCE) will grow by 6.9% in FY24, compared to 7.5% in FY23.
The agency identified some positive signs in private capital expenditure, citing a recent Reserve Bank of India paper. While exports face challenges, the services sector’s recovery remains on track. However, India Ratings expressed concern about monsoon rainfall and industrial growth.
In terms of inflation, the agency anticipated a decrease in retail inflation, with headline Consumer Price Index (CPI) inflation projected to be 5.5% for FY24. It also noted that financial conditions would remain tight.
Finally, India Ratings highlighted the government’s challenge in meeting its 5.9% fiscal deficit target. This was based on the observation that gross tax collection growth in the first four months of the fiscal year was just 2.8%, significantly below the 10.4% estimated in the Budget.
Source: Financial Express