Indian economy to grow at 6.5% real GDP for FY24: Finance Ministry

The Union Finance Ministry on September 22 released its monthly economic review for August 2023, saying it would be comfortable with balanced risks at 6.5 per cent real GDP growth estimate for FY24.

The report noted that estimates of national income released by the National Statistics Office (NSO) showed real GDP growth at 7.8 percent in Q1 of FY24.

Citing strong domestic demand for consumption and investment, the ministry said these led to growth in Q1 of the fiscal year. The government also said improved corporate profitability, private capital formation and bank credit growth led to expected results.

The 7.8 percent growth recorded in the first quarter (April-June) was seen in various high-frequency indicators.

While flagging some risks such as steady rise in crude oil prices in the global market and impact of lack of monsoon in August on Kharif and Rabi crops, „it needs to be assessed.” The ministry noted that the rains in September have removed part of the rain deficit at the end of August.

„Overall, we are comfortable with balanced risks at 6.5 percent real GDP growth estimate for FY24,” it said.

read more: Economic outlook bright but high oil prices worrisome: FinMin

Both the manufacturing and services sectors saw strong growth in their output and value added in Q1 of FY24 as strengthening consumption led to increased demand for goods and services. It said the strength of domestic investment was a result of the government’s continued emphasis on capital expenditure and measures implemented by the central government had also encouraged states to increase their capex spending.

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The contribution of net exports to GDP growth increased in Q1 of FY24 as services exports performed well, and the report said, „HFIs for July/August 2023 reflect evidence of growth momentum in Q2 of FY24.”

Banking Sector:

In the banking sector, the report said various indicators are increasing the sector’s resilience through declining non-performing assets (NPA), improving capital risk weighted asset ratio (CRAR), return on assets (RoA) and revenue growth. Return on Equity (RoE) as on March 2023

Data for non-banking financial institutions (NBFCs) indicate improvements in their profitability and risk-taking behaviour. It cited the RBI estimates of July 2023, where a steady and broad-based growth in non-food bank loans of scheduled commercial banks (SCBs) from April 2022 is shown.

„The robust health of the banking system can be attributed to the demonetisation process undertaken by the corporate sector in the previous decade,” the report said, adding that the pace of growth in the private non-financial sector continued from the last quarter of FY23. First quarter of FY24.

The balance sheet restructuring has put companies in a better position to expand their investment and to be more resilient to economic shocks, the ministry said in a statement. It added that the healthy performance of the corporate sector has confirmed and strengthened investor confidence in the Indian growth story.

Inflammation:

Measured measures taken by the government helped reduce core inflation to a 40-month low, the report said, with retail inflation easing in August, core inflation and food inflation easing from the July figure. Consumer food price inflation eased to 9.9 percent in August.

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Risks remain:

While optimistic about achieving the 6.5 percent real GDP growth estimate for FY24, the report cited risks including rising crude oil prices, lack of monsoon in August and a stock market correction. „Offsetting these risks are bright spots in corporate profitability, private sector capital formation, bank credit growth and activity in the construction sector,” the report said.

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Updated: 22 Sep 2023, 07:00 PM IST

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