Despite global headwind, India asserts its pivotal role in supporting the global growth trajectory, says a Finmin report. Also, it said better monsoon projections eases inflationary concern.

These remarks have been made at a time, when various domestic and global agencies have raised India’s growth estimate for current fiscal. Last week, International Monetary Fund (IMF) upped its growth projection for India by 30 basis points to 6.8 per cent for the current fiscal year. 

Earlier, Asian Development Bank (ADB) revised its projection to seven per cent from 6.7 per cent for the current fiscal. RBI estimates growth to be seven per cent.

“India continues to be the fastest-growing major economy with positive assessments of the growth outlook for the current financial year, for India by international organisations and RBI,” the Monthly Economic Review (MER), prepared by Economic Affairs Department of Finance Ministry said. 

It also took note of revision in projection for just ended fiscal year (2023-24 or FY24). The IMF, in its April 2024 World Economic Outlook (WE), has revised upwards its estimate of India’s real GDP growth for FY23-24 to 7.8 per cent from 6.7 per cent in its January 2024 update and 6.3 per cent in its October 2023 WEO.

“Resilient growth, robust economic activity indicators, price stability, and steady external sector performance continue to support India’s promising economic performance amidst uncertain global conditions,” the report said. 

It dealt the issue of inflation in details. It mentioned that global inflation remains contained overall and has declined in most regions, but the recent uptick in inflationary pressures across nations along with persistence in core inflation warrants attention. In India, the government and the RBI’s efforts to combat inflation, including calibrated policy rates, strengthening food buffers, and easing imports, have ensured effective inflation management.

Consequently, “retail inflation in FY23-24 witnessed a significant decline, reaching its lowest level since the COVID-19 pandemic, with core inflation dropping to 3.3 per cent in March. Further, a predicted above-normal monsoon in 2024 bodes well for a good harvest, easing inflation concerns,” the report said.

Talking about foreign exchange inflow, it said that FPI (Foreign Portfolio Investor) flows saw a significant turnaround in FY23-24. Supported by rising economic growth, a favourable business environment, and strong macroeconomic fundamentals, India witnessed robust FPI inflows in FY23-24.

Net FPI inflows stood at $41 billion during FY23-24, as against net outflows in the preceding two years. This is the second-highest level of FPI inflow after FY14-15. India received the highest equity inflows among emerging market peers during FY23-24.

“The imminent inclusion of India’s sovereign bonds in global bond indices is likely to spur demand for exposure to India further,” it said. Though owing to a rise in repatriation/disinvestment, net FDI moderated to $25.5 billion in the first ten months of FY23-24 from $36.8 billion a year ago, the foreign exchange reserves reached an all-time high of $645.6 billion as of March 29. This is “sufficient to cover 11 months of projected imports and more than 100 per cent of total external debt,” it said.