NCAER predicts no change in policy rates as MPC gathers for April meeting

National Council of Applied Economic Research (NCAER) on Sunday said that Indian economy remained buoyant at the end of fiscal 2023-24 and set to clock 7.6 percent growth as projected in the CSO’s second Advance Estimate.

Both the Purchasing Manager’s Index (PMI) for manufacturing and services are maintaining a robust trend, raising optimism about the economy. 

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 Key markers point to the Indian economy remaining buoyant at the end of FY 2023-24 with PMI for manufacturing increasing and that of services maintaining a robust trend, according to NCAER’s Monthly Economic Review for March 2024.

The PMI for manufacturing activity increased to 56.9 in February, reflecting a strong expansionary momentum. Growth in the output of eight key infrastructure sectors rose to a three-month high of 6.7 per cent in February from 4.1 per cent in January 2024.

GST collections too remained buoyant, reaching a value of ₹ 1.7 lakh crore in February, registering a year-on-year growth of 12.5 per cent. Collections of GST E-way bills marked an equally impressive year-on-year growth of 18.9 per cent.

Bank credit growth remained strong at 20.5 per cent with robust growth for personal loans, services, and agriculture and allied activities.

“These and other markers corroborate the optimistic growth outlook of 7.6 per cent growth rate for FY 2023-24 as per the Second Advance Estimates,” said NCAER Director General Poonam Gupta.

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“As in the past economic growth has been accompanied by indicators pointing toward macroeconomic sustainability”.

The external sector, in particular, has improved with the Current Account Deficit (for Q3 FY2023-24) moderating; remittances flow remaining high at $31.4 billion; services trade surplus increasing; portfolio inflows resuming; and all of this enabling a sharp increase in India’s foreign exchange reserves to nearly $650 billion, Gupta said.

“Strong growth combined with elevated inflation rates will likely result in a status quo on policy rates when the Monetary Policy Committee meets on April 3-5”, Gupta added.

Meanwhile, inflationary pressures remained elevated with Consumer Price Index headline inflation at 5.1 percent in February 2024, primarily due to high food price inflation and despite core inflation declining.

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