Is the growth forecast for India on the upswing? What are the positive surprises? Which are the sectors that have performed well? Why are exports still sluggish? Is inflation under control? What is expected in terms of policy-making in an election year?
The story so far: Reeling from the aftershocks of the Ukraine-Russia conflict, such as elevated oil prices and high inflation, 2023 had begun on a sombre note with worries of an economic slowdown leading to a hard recessionary landing for advanced economies that would drag down growth in emerging economies like India’s too. As it turned out, the year was kinder than expected and the worst fears haven’t materialised yet, despite a fresh geopolitical flashpoint in West Asia and a few bank collapses in the West (remember Silicon Valley Bank or SVB, whose implosion compelled our own Shamrao Vithal Co-operative Bank to clarify all is well). While Indian stock markets ended the year at record highs, the economy has delivered positive surprises, with ₹1.6 lakh crore becoming the new normal for monthly GST collections and GDP growth hitting 7.7% between April and September on top of a 7.2% rise in 2022-23.
The Reserve Bank of India, which had earlier projected India’s real GDP to grow 6.5% in 2023-24, has recently raised its forecast to 7%. The Finance Ministry is more sanguine as of now, indicating an uptick of over 6.5% for the year ending March 31, 2024, in its review of the economy published this Friday. Global agencies have also rebooted their growth math for India. “Some of the key sectors of the economy — construction, manufacturing, financial and real estate services — are showing a robust growth and even the trade, hotels, transport sector which had remained below its pre-COVID level of 2019-20, has now fully recovered,” said noted economist and chief policy adviser at EY India, D.K. Srivastava. “The Indian economy has now left the COVID shadow well behind and negotiated the global headwinds that emerged due to the ongoing geopolitical conflicts well, with reliance on domestic growth impulses,” he reckoned. While the domestic growth engine is pulling along, risks to the growth and stability outlook mainly emanate from outside the country, the Finance Ministry noted. Slack global demand has been hurting goods exports through 2023, and IT-led services exports may feel greater heat in the coming year as developed economies continue to face challenges. While hopes of peaceful resolutions in conflict-riven zones remain slim, fresh disruptions like the attacks on shipping lines in the Red Sea corridors could pose greater challenges. Interest rate cuts by central banks will be watched closely.
