New Delhi: Attributing it to strong fundamentals, sustained government spending, and the prospect of a new private corporate capex cycle, India Ratings and Research (Ind-Ra) on Wednesday raised the Indian economy’s growth estimate for the financial year 2023–24 to 6.7% from 6.2% projected earlier.
The rating agency, however, noted that weak global growth, lower than anticipated trade volume, and geo-political tensions would continue to weigh on India’s GDP growth in the current financial year.
“All these risks will continue to weigh on and restrict India’s GDP growth to 6.7% in FY24 (FY23: 7.2%). The quarterly GDP growth, which came in at 7.8% yoy and 7.6% yoy in 1QFY24 and 2QFY24, respectively, is slated to slow down sequentially in the remaining two quarters of FY24,” said Dr. Sunil Kumar Sinha, Principal Economist, Ind-Ra.
The RBI also expects a sequential slowdown in GDP growth in the remaining two quarters and expects the overall FY24 GDP to come in at 7.0%.
Ind-Ra expects the private final consumption expenditure (PFCE) to grow 5.2% year-on-year (yoy) in FY24, while gross fixed capital formation (GFCF) is seen expanding 9.5% during this period.
“Fiscal challenges faced by the government, mainly due to lower nominal GDP growth (9.6%) than the budget assumption (10.5%), may lead to lower capital expenditure by the union government and may also reflect in GFCF growth in FY24,” it said.
The rating agency said that the private sector’s greenfield capex, barring a few sectors, has remained down and out for several years. It, however, mentioned a study published in the RBI Bulletin that noted that a new private corporate capex cycle is in the offing and private capex spend could reach a decade-high in FY24.
The rating agency said that meeting the FY24 fiscal deficit target will be challenging. It expects the current account deficit to narrow down to 1.3% of GDP in FY24 in response to evolving domestic and global demand conditions.
