The robust 7.7% growth in the first half of the fiscal year 2023-24 hasn’t completely dispelled concerns for India’s economic prospects, with economists maintaining cautious optimism. While many have revised GDP growth forecasts upwards, projections for the fiscal year range from 6.5% to 6.7%, indicating a moderate outlook.
India Ratings and Research recently revised its GDP growth estimate for FY24 to 6.7%, citing factors such as the resilience of the Indian economy, sustained government capex, and a potential new private corporate capex cycle. Despite the positive momentum, risks such as weak global growth, trade challenges, and limited broad-based consumption demand persist.
The Reserve Bank of India, anticipating a sequential slowdown in the remaining two quarters, projects an overall FY24 GDP growth of 7%. Economic growth in the last fiscal was 7.2%, and the government’s initial estimate for the current fiscal was 6.5%. However, the unexpectedly strong performance in the first two quarters has led to increased confidence in economic prospects.
As the National Statistical Office prepares to release the first advance estimate of GDP growth for 2023-24 on January 5, analysts point to the farm sector as a potential concern. While sectors like manufacturing and services are showing expected rates of growth, agriculture has not performed as well as anticipated.
Economists, including Madan Sabnavis of Bank of Baroda and Aditi Nayar of ICRA Ltd, have revised GDP growth forecasts to around 6.6% to 6.7%. Factors such as a less-than-optimal performance in agriculture and the temporary impact of the Model Code of Conduct ahead of General Elections contribute to a cautious approach.
Despite challenges, there is still optimism about growth prospects, with some analysts expecting the economy to grow by 7% this fiscal. Manufacturing remains a driver for growth, while the service sector may experience some moderation. A renewed capex cycle, a well-capitalized banking system, robust credit growth, and strong domestic consumption contribute to India’s standing as one of the fastest-growing large economies globally.
