According to India Ratings and Research, the gross domestic product (GDP) of India is expected to increase by 5.9% year over year (YoY) in fiscal 2024 (FY24) (Ind-Ra). The National Statistical Organization (NSO) first advanced estimate (AE) for FY23 GDP is 7.0%, although the organisation does not anticipate that the growth momentum shown in FY23’s first half (1HFY23) would continue in FY23’s second half (2HFY23). The NSO predicts a decline in GDP growth to 4.5% in 2HFY23 from 9.7% in 1HFY23.
“Although there are some encouraging signs for India, including sustained government spending on infrastructure, deleveraged businesses, low non-performing assets (NPA) in the banking sector, a production-linked incentive programme, and the likelihood that global commodity prices will remain muted, Ind-Ra believes they are still insufficient to take the FY24 GDP growth rate. Above 6%,” said Sunil Kumar Sinha, Ind-chief Ra’s economist.
In the fiscal year 2024, private final consumption expenditure (PFCE) in India is anticipated to increase by 6.7% YoY. The report cautions that because the current consumption demand is heavily skewed towards products bought by households in the higher income bracket, this growth would not result in a resurgence in broad-based consumer demand. In the meantime, there hasn’t been a consistent improvement in goods for mass consumption.
According to the research, gross fixed capital formation (GFCF) is the second-largest demand-side contributor to GDP. In FY24, Ind-Ra anticipates GFCF to increase by 9.6% YoY, led by continued government spending. Capital account expenditures in the union budget for FY24 and grants-in-aid for the development of capital assets have been estimated at Rs. 13,71,00,000 crore, up 30.1% from the FY23 revised estimate. Government capex/GDP will reach 4.54 percent in FY24 as a result of this.
According to India Ratings, GFCE has been giving the economy long-needed assistance, averaging 7.9% growth from FY16 to FY20. Nonetheless, Ind-Ra anticipates GFCE to increase by 2.5% YoY in FY24 as a result of the government’s change in emphasis to capital expenditures.
The research emphasises how the net exports component has consistently been negative over time, not positively impacting aggregate demand. While a smaller amount of negative net exports would be beneficial for overall demand, Ind-Ra anticipates the share of negative net exports to increase.
