Private consumption, investment demand pivot for India's FY23 outlook

Slowing global gross domestic product (GDP) growth, however, could also have a bearing on the economy, it said.

"Overall, various high-frequency indicators have been exhibiting a mixed trend so far in FY23. While indicators such as GST [goods and services tax], E-way bill registrations, credit growth and PMI services have been performing well, others continue to lag. As a result, the economic recovery has remained uneven," the rating agency said.

Challenges on account of geopolitical risks and inflation continue to hamper the growth momentum, whereas consumption demand is improving, albeit at a slower than desired pace.

"CareEdge Economic Meter (CEM) continued on the downward trajectory in June for the third straight month. The score eased to 5.4 after ending the previous financial on a high of 7.6. The moderation in the score, in part, reflects the cooling down of pent-up demand following the Covid-19 third wave," it said.

The Indian economy is also facing inflationary challenges that have particularly affected the manufacturing sector. Consumption has been slow to recover amid growing inflationary expectations, the report said.

Other challenges affecting the pace of the economic recovery include financial sector volatility amid growing interest rates, fund outflows and weakening of domestic currency.

With progress in rainfall and improved Kharif sowing in July, the demand for agricultural laborers is expected to rise, which may bode well for rural employment as well as rural consumption demand. Urban employment is expected to gain from the rising economic activities as well, the report added.

ALCHEMPro News Desk (DS)