“Although there are a few positives for India such as sustained government capex, deleveraged corporates, low non-performing assets (NPA) in the banking sector, production-linked incentive scheme and likelihood of global commodity prices remaining subdued, Ind-Ra believes they are still not sufficient to take the FY24 GDP growth beyond 6 per cent,” noted Sunil Kumar Sinha, principal economist, Ind-Ra.

India’s gross domestic product (GDP) is projected to grow 5.9 per cent YoY in fiscal 2024 (FY24), as per India Ratings and Research (Ind-Ra). Although National Statistical Organisation’s (NSO) first advanced estimate (AE) of FY23 GDP is 7.0 per cent, it does not expect the growth momentum witnessed in the first half of FY23 (1HFY23) to sustain in 2HFY23.

India’s private final consumption expenditure (PFCE) is expected to grow by 6.7 per cent YoY in the financial year 2024. However, the report suggests that this growth may not lead to a broad-based consumption demand recovery, as the current consumption demand is highly skewed towards goods consumed by households belonging to the upper income bracket. Meanwhile, goods of mass consumption have yet to show a sustained pick-up.

The report also indicates that gross fixed capital formation (GFCF) is the second-largest component of GDP from the demand side. Ind-Ra expects GFCF to grow by 9.6 per cent YoY in FY24, driven by sustained government capex. In the union budget FY24, expenditure on the capital account and grants-in-aid for the creation of capital assets has been pegged at ₹13.71 lakh crore, an increase of 30.1 per cent from the FY23 revised estimate. This will push the government capex/GDP to 4.54 per cent in FY24.

India Ratings said GFCE had been providing much-needed support to the economy for a while, averaging 7.9 per cent growth during FY16-FY20. However, due to the government’s focus shifting towards capex, Ind-Ra expects GFCE to grow by 2.5 per cent YoY in FY24.

The report highlights that the net exports component has been negative over the years and thereby not contributing positively to aggregate demand. While a reduction in the size of negative net exports would be a positive for aggregate demand, Ind-Ra expects the share of net exports to GDP to increase to negative 9.2 per cent in FY24 from negative 7.1 per cent in FY23, as merchandise exports lose steam due to the global growth slowdown and merchandise imports do not moderate proportionately. Overall, Ind-Ra expects the industrial sector to grow by 3.9 per cent YoY in FY24.

Fibre2Fashion News Desk (NB)