India's GDP growth forecast for FY24 revised up to 6.2%: Ind-Ra

Despite the positive indicators, several constraints will limit growth. Exports, facing global headwinds, have recorded negative growth in the first quarter (Q1) of FY24. Additionally, a 10 per cent monsoon deficit by end-August 2023 is expected to pose new challenges. Meanwhile, the International Monetary Fund expects a drop in global GDP growth to 3 per cent for both 2023 and 2024, down from 3.5 per cent in 2022, as per Ind-RA

Ind-Ra expects the private final consumption expenditure (PFCE) to grow by 6.9 per cent year-on-year in FY24. Sustained real wage growth, particularly in the lower income bracket, is deemed crucial for consumption growth. On the investment side, gross fixed capital formation (GFCF) is expected to grow by 10.1 per cent, mainly due to government capex. A shift in government expenditure towards capex is expected to limit the growth in government final consumption expenditure (GFCE) to 2.7 per cent.

A study published by the Reserve Bank of India (RBI) suggests that a new cycle of private corporate capex is imminent. Odisha is becoming a hub for new projects in textile and power sectors, alongside traditional leaders like Uttar Pradesh, Gujarat, and Maharashtra. However, goods exports are expected to grow only by 3 per cent, and imports by 8.6 per cent, owing to global constraints.

Ind-Ra forecasts that the retail and wholesale inflation will stand at 5.5 per cent and 1 per cent, respectively, for FY24. The RBI is expected to maintain a long pause on the repo rate while monitoring core inflation.

Meeting the fiscal deficit target for FY24 is expected to be challenging. While the gross tax collection growth has been modest at 2.8 per cent, the union government has continued capex spending, resulting in a fiscal deficit at a three-year high.

Ind-Ra expects the current account deficit to narrow to 1.3 per cent of GDP, supported by remittances and software exports. The trade deficit is estimated to be $260.5 billion, but a net addition of $28.6 billion to the forex reserve is expected, which could keep the Indian rupee averaging at 84.14/$ in FY24.

ALCHEMPro News Desk (DP)