The Gross Domestic Product (GDP) of India is expected to grow at 6 per cent in the next fiscal 2023-24, slower than the 7 per cent level earlier estimated for the current year 2022-23, according to CRISIL. The estimates are 40 bps lower than the Reserve Bank of India’s estimate of 6.4 per cent and 100 bps lower than CRISIL’s FY23 estimate of 7 per cent.
In its latest report, the ratings agency said that “in fiscal 2024, the Indian economy will grow a tad slower, hemmed in by sluggish exports and the lagged impact of rate hikes manifesting fully”.
“The key challenge to the Indian economy in the coming fiscal is to grow when the world is slowing,” CRISIL said about the GDP growth in FY24.
The ratings agency said that the risks to inflation are "tilted upward" due to the predictions of El Nino over the next couple of months.
“The challenges have shifted — from the pandemic to the fallouts of the Russia-Ukraine war and aggressive rate hikes by major central banks to fight inflation. Policy rates are at decadal highs across the advanced world. Slowing global growth will put the brakes on India’s exports. Additionally, as policy rate hikes filter through the economy, tighter domestic financial conditions are likely to weaken demand,” the report said.
Consumer inflation in India is expected to moderate to 5 per cent on average in FY24 from 6.8 per cent in FY23, owing to the high-base effect and some softening of crude and commodity prices.
"India's medium-term growth prospects are healthier. Over the next five fiscals, we expect GDP to grow at 6.8 per cent annually, driven by capital and productivity increases," said Amish Mehta, managing director and chief executive officer (CEO) at CRISIL.
According to Dharmakirti Joshi, chief economist at CRISIL, the current account deficit (CAD) is expected to narrow to 2.4 per cent of the gross domestic product (GDP) from the estimate of 3 per cent in the current year. This will reduce the country's external vulnerability.
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Other major points
The report said a good rabi harvest would help cool food inflation, while the slowing economy should moderate core inflation.
The report added that higher capital investments by the government and the private sector should drive medium-term growth.
Corporate balance sheets
The report added that corporate balance sheets are looking healthy and that a “robust” banking system and the government’s capex thrust should create momentum and support fixed investment.
“Going forward, we expect government capex support to moderate as pressure to fiscally consolidate rises,” it said.
It added that the private capex is expected to start seeing an uptick. “Private consumption, which has been slow to recover compared with exports and fixed investment, has more recently been driven by a pick-up in contact-based services, some improvement in rural incomes, and resilience in urban demand,” the report added.
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