Although the first half of fiscal year 2023-24 saw 7.7% growth, economists remain pessimistic about the fiscal's economic prospects due to concerns over the farm sector. Most analysts have upped their GDP growth projections for the fiscal year, but they still expect it to remain in the 6.5% to 6.7% range.
India Ratings and Research raised its GDP growth forecast for FY24 to 6.7% from 6.2% previously. "This has been led by a number of factors: i) the resilience of the Indian economy, which grew 7.6% YoY in Q2FY24, ii) sustained government capex, iii) deleverage balance sheet of corporate and banking sector, iv) the prospect of a new private corporate capex cycle, and v) sustained momentum in business and software services exports, coupled with remittances from the rest of the world despite global headwinds," the ministry said in a statement. It did, however, emphasize challenges such as sluggish global economy and trade, as well as the fact that consumption demand is not broad-based.
"All of these risks will continue to weigh on India's GDP growth, limiting it to 6.7% in FY24." "The quarterly GDP growth, which was 7.8% YoY in Q1FY24 and 7.6% YoY in Q2FY24, is expected to slow sequentially in the remaining two quarters of FY24," said Sunil Kumar Sinha, Principal Economist, Ind-Ra. The Reserve Bank of India also forecasts a sequential deceleration in GDP growth in the last two quarters, with the overall FY24 GDP expected to be 7%.
The economy increased by 7.2% in the previous fiscal year, and the government predicted a 6.5% increase in the following fiscal year. However, stronger-than-expected growth in the first two quarters of the fiscal year has increased confidence in economic prospects. On January 5, the National Statistical Office will announce the first advance estimate of GDP growth for 2023-24.
According to Madan Sabnavis, chief economist of Bank of Baroda, the GDP could grow by 6.6% to 6.7% this fiscal year. The prior forecast was 6.5%, which was revised upward following second-quarter GDP growth figures. Sabnavis, on the other hand, noted that agriculture has not performed as well as planned, despite other sectors expanding at expected rates. "We expect farm sector to grow by 0.5% to 1% this fiscal," he told reporters.
Aditi Nayar, Chief Economist and Head of Research and Outreach at ICRA Ltd, has increased her GDP growth prediction for the fiscal year to 6.5% from 6.2% previously and 6% initially. "The agricultural outlook is bleak, and this may have an impact on rural demand." The Model Code of Conduct in front of the General Elections may have a short-term impact on capex. "Because of these two factors, we have kept our GDP estimate at 6.5%," she explained.
Between April and November of this year, the Centre's total expenditure was Rs 26.5 lakh crore, or roughly 59% of the Budget Estimate. However, the rate of capital spending appears to have slowed, standing at Rs 5.85 lakh crore, or 58.5% of the BE of Rs 10 lakh crore in the period, a sub-2% growth year on year.
Suman Chowdhury, Chief Economist and Head of Research at Acuité Ratings & Research, stated that the agency has increased its GDP growth forecast for the fiscal year to 6.0%, up from 6% previously. "We've been a little cautious because we expect the rural economy to slow," he said, adding that manufacturing will continue to be a source of development while the service sector may experience some slowing in growth.
Agriculture expanded by 2.4% in the first half of the fiscal year, while manufacturing grew by 9.3%, compared to 0.9% in the first half of FY23. Gross value added in trade, hotels, transportation, communication, and broadcasting services increased by 6.6% in the first half of the fiscal year, compared to 20.1% the previous year, while financial services increased by 9%, compared to 7.8% the previous year.
However, there is still optimism about the economy's growth prospects, with some analysts predicting a 7% increase this fiscal year. "While global growth is anticipated to decelerate in CY24, we expect India's GDP to increase by 7.0% in FY24 and 6.5% in FY25....India stands out in terms of GDP growth prospects..."India has been the fastest growing large economy globally over the last two years, driven by a renewed capex cycle, a well-capitalised banking system, robust credit growth, an upturn in the housing sector, robust domestic consumption, and growing services exports," it said in a recent study.
