India’s GDP is expected to grow in the 6-6.5 per cent range in FY24, with agriculture growth continuing at a healthy pace, a recovery in industrial growth and the services sector remaining resilient, according to Bank of Baroda’s economic research department (ERD).

The projection takes into account an expected slowdown in the global economy, which may impact the external sector, and the continued resilience of the domestic economy.

BoB’s GDP growth estimate for India for FY24 is slightly higher than IMF’s projection of 5.9 per cent.

According to advance estimates, India is expected to clock 7 per cent GDP growth in FY23.

BoB’s ERD team, comprising Chief Economist Madan Sabnavis and Economists Jahnavi and Aditi Gupta, said IMD’s prediction of a normal monsoon (at 96 per cent of long period average) bodes well for agricultural production, with foodgrain production expected to increase 2-3 per cent this year.

However, they cautioned that there are some downside risks to spatial distribution of rainfall, heatwave conditions due to El Nino, unseasonal rainfall and late departure of the monsoon.

The department underscored that industrial growth would recover. It is upbeat about prospects for mining and quarrying, wood and wood products, paper and paper products, glass and glassware, cement and cement products, electronics, construction, renewable energy, roads, airports, railways, chemicals and chemical products.

While prospects for the food processing, beverages and tobacco, leather and leather products, rubber and plastics, petroleum and refinery products, automobiles and FMCG remain steady, the ERD is downbeat on the prospects for textiles, machinery, engineering goods, gems and jewellery, ports and durables.

The base effect and waning pent-up demand will lead to a moderation in service sector growth in FY24, according to the ERD’s assessment.

Trade, finance, hotels and transport will be the main growth drivers in the service sector, it added.

The ERD noted that the fiscal deficit target of 5.9 per cent of GDP for FY24 will be met.

Gross borrowings at Rs 15.43 lakh crore in FY24 are only marginally higher than Rs 14.21 lakh crore in FY23, the economists said.

Referring to the Government’s FY24 capital expenditure target of Rs 10 lakh, the ERD team said this would provide an impetus to industrial growth due to the multiplier effect. The major focus of the capex will be railways, roads, defence and urban development.

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