India's economy is expected to grow at 6.5 per cent in the fiscal year (FY) 2024-25, the Indian Ratings and Research (Ind-Ra) said on Thursday. The company also expects the pace of private investment to pick up if the current government returns to power.
The agency's forecast is 50 basis points (bps) lower than the Reserve Bank of India's (RBI) target of 7 per cent, but on par with the International Monetary Fund's (IMF) forecast of 6.5 per cent. Growth is estimated at 7.3 percent in the current financial year
The company said the economic recovery is on track due to several factors, including sustained government capex, healthy corporate performance, reserved corporate and banking sector balance sheets, continued softness in global commodity prices and the prospect of a new private capex cycle.
A positive outlook
Although growth is expected to be lower in the next financial year, this will not affect the private investment cycle, which is good for the economy, the agency said. „When we look at the leading indicators, they all point to the private corporate sector becoming more enthusiastic about reinvestment at this stage. It may or may not happen the way we want, but some flavor of it has already started to become clear, at least the intentions and they (corporates) are now banking on it. projects,” Ind-Ra Principal Economist Sunil Kumar Sinha told a press conference here.
According to the agency, ₹3.53-lakh crore has been mobilized to fund a total of 982 major projects in 2022-23 — over ₹1,000 crore. This is significantly higher than the ₹1.98 lakh crore raised to fund 791 such schemes in 2021-22. According to Sinha, while it's „early days” for the private capex cycle, companies are also taking hope from the prospect of another shock, of which the past few years have seen several, such as the Covid pandemic and Russia's invasion of Ukraine.
„With increasing demand, capacity utilization in the private sector should start rising from the current total level of 75 per cent. Meanwhile, some sectors like cement and steel have already crossed their capacity utilization levels of 80-85 per cent. Hence, investments in those sectors have already started,” he said.
However, the agency cautioned that consumption demand is still skewed in favor of households in the top 50 percent of incomes. „Increase in input costs, if not adequately passed on to output prices, will reduce value addition and corporate margins,” Sinha said, adding that consumption is not broad-based and manufacturers find it difficult to supply more inputs. Cost of issue price.
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