India Ratings & Research (Ind-Ra) has upped India’s GDP (Gross Domestic Product) growth forecast to 6.2 per cent from 5.9 per cent for FY24. This is in line with many other agencies, while the government and the Reserve Bank of India expect growth to be 6.5 per cent.

Indian economy grew by 7.2 per cent in FY23.

S&P Global Market Intelligence has revised India’s growth forecast for FY24 to 6.6 per cent due to strong growth in the April-June quarter, up from the 5.9 per cent projected in August. The Organization for Economic Cooperation and Development (OECD) has raised India’s GDP forecast for 2023-24 to 6.3 per cent from 6 per cent projected earlier. Earlier, Fitch Ratings raised its growth forecast to 6.3 per cent for the current fiscal year, from 6 per cent.

Growth factors

In its latest forecast, released on Wednesday, Ind-Ra attributed its revision to a variety of factors, including the government’s capital expenditure, deleveraged balance sheets of India Inc and banks, subdued global commodity prices and the prospect of private capital expenditure picking up. However, it also flagged some constraints on GDP growth in the current fiscal year before the general elections, including a slip in global growth, which has hit Indian exports, tighter financial conditions upping cost of capital domestically, a deficit monsoon and tepid manufacturing growth. 

“All these risks will continue to weigh and restrict India’s GDP growth to 6.2 per cent in FY24, and the quarterly GDP growth, which came in at 7.8 per cent in the June quarter, is slated to slow down sequentially in the remaining three quarters of FY24,” Ind-Ra principal economist Sunil Kumar Sinha said.

Consumption demand

The agency said the consumption demand is not broad based and estimated the private final consumption expenditure to grow 6.9 per cent in FY24 as against 7.5 per cent in FY23. The real wage growth of households belonging to the lower income bracket has been negative since the fourth quarter of FY21 and became marginally positive only the December quarter of FY23, it said, adding that the same for households belonging to the upper income bracket rose in the range of 9.5 per cent to 12.7 per cent during the same period.

There are some green shoots visible on the private capital expenditure front, the agency noted, citing a recent Reserve Bank of India paper. The agency said while exports are facing headwinds, the services sector recovery is on track. It, however, called out monsoon rainfall and industrial growth as “areas of concern”

ADB’s Forecast

Meanwhile, ADB said that growth for fiscal year 2023-24 will remain high at a forecast 6.3 per cent albeit a tad lower than April’s 6.4 per cent projection. Strong private consumption and upticks in public and private investment are expected to brighten India’s outlook. “The slight downward revision for FY is due to erratic rainfall patterns during the monsoon which will affect agriculture output in the upcoming harvest,” it said while adding that for fiscal year 2024-25, India’s forecast remains at 6.7 per cent.

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