According to a Reuters report, the bank’s chief economist, Endermit Gill, put a bleak outlook on the June forecast, saying 2023 would be one of the slowest growth years for advanced economies in the past five decades. This makes India’s estimated number even brighter.
Here are a few more predictions for India – 5.9% by the International Monetary Fund (IMF) and 6.5% by the Reserve Bank of India (RBI). Bibek Debroy, chairman of the Prime Minister’s Economic Advisory Council, put the figure at 6.5%. Speaking to ET, he said forecasts tend to underestimate India’s growth numbers. “By 2022-23, outside of government, forecasts were generally reluctant to break that mental threshold of 7%, with 6.9% preferred versus 7.1%, which was almost the same price point for a product. Ultimately, India’s gross domestic product (GDP) growth for 2022-23 was 7.2 percent – higher than most forecasts. Debroy, however, admitted that India should aim for 7 to 7.5 percent growth in the next three to five years.
What is the most likely growth number for the current fiscal year? Despite headwinds – including a slow recovery in domestic production, uncertain geopolitics and the threat of El Niño affecting winter monsoons – India’s economy remained strong on 24 It could grow by about 6.5%. This is short of a growth rate of 7% or more. Not long ago, India was looking to achieve a double-digit growth rate – a reasonable target in 2016-17 and 7.2% in 2017-18 before going south. In the year In 2019-20, a non-Covid outbreak year, India’s GDP growth rate was a meager 3.7 percent.
According to DK Srivastava, Principal Policy Advisor, EY India, India’s GDP growth is likely to be 6.2-6.3 percent in FY24. “Our assessment is that the actual outcome depends on the severity of El Nino’s impact on rainfall and therefore agricultural production. Due to the neutralization of El Nino over the Indian Ocean Dipole, this negative impact is likely to be moderate this year,” he said.
El Niño is a climate pattern associated with abnormal surface temperatures in the equatorial Pacific Ocean. The India Meteorological Department (IMD), a government forecaster, said this could affect the monsoon, especially the second period in August and September. Dipole, on the other hand, refers to the sea surface temperature of the Indian Ocean. Monsoon is an important event in India’s economic calendar because about half of the country’s net cultivated area is still dependent on rain. India’s Gross Value Added (GVA) growth rate during the Covid-19 period (4.1% in 2020-21, 3.5% in 2021-22 and 4% in 2022) in the agriculture and allied sectors is positive, so its significance should be underlined. 23) When most other sectors fail. (GVA is GDP plus subsidies taxes.) Any significant decline in agricultural growth will have a negative impact on GDP. Can this continue?
There is one more concern. Can India achieve sustained, strong growth rates as the epidemic slows? According to a recent EY analysis, India is likely to see a multi-year growth cycle in “private investment cycle for manufacturing and infrastructure” despite risks of geopolitical fragmentation and uncertainty in the global economy.
EY’s Srivastava said some sectors such as manufacturing have yet to fully recover. “The manufacturing was contracted in 20 before covid. In this sector, the combined annual growth from the 19th fiscal year to the 23rd fiscal year is slightly less than 3 percent,” he said. “This will bring the Indian economy closer to a potential growth rate of 7%,” he said.
Rumki Majumdar, economist at Deloitte India, says that unlike agriculture, sectors like manufacturing and construction have seen a consistent recovery. We expect growth to be between 6% and 6.5% in 2023-24. Gross domestic product growth is driven by private investment, starting a virtuous cycle of job creation, income and productivity,” she said.
“An El Nino-led, below-normal rainfall will put a lot of stress on the agricultural sector and rural demand, slowing consumption growth,” says Majumdar. “It will also put pressure on food inflation.” RBI, which projects a growth of 6.5%, is mainly banking on the liberal capital expenditure (Capex) announced in the last Union Budget. The cost of capital investment increased by 33% to 10 lakh rupees. An interest-free loan of 1.3 million birr for the states is also a condition that the money be released in the current fiscal year.
The central bank’s annual report 2022-23 said: “The contraction caused by sustained government capex increases in recent years is expected to spur strong private investment in 2023-24.” The outlook in the medium term may depend on the Union Government being able to sustain its history of high capex.
The RBI raised the repo rate by 250 bps between May 2022 and February 2023 with one objective in mind – curbing inflation, a critical factor in future growth expectations. Inflation in the last fiscal year averaged 6.7 percent, up 115 bps from a year earlier. Despite rising food, energy and commodity prices domestically and globally, and several other challenges such as aggressive monetary policy tightening and severe geo-economic fragmentation, the Indian economy has shown resilience in 2022-23, the RBI report said.
As we enter the third month of the fiscal year, it is clear that some of these challenges have weakened but not disappeared. The global environment, especially in advanced economies, remains weak – and this may affect India’s exports and FDI inflows. Even against this backdrop, several economists estimate that India could post a good 6.5% GDP growth rate for the year, unless a new monster emerges and these calculations go awry.
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