Economy Likely To See Good Vibes In 2024

(MENAFN- Live Mint) "New Delhi: A boost to government spending and consumption in the wake of national polls, geopolitical uncertainties coming off from the peaks seen this year and a strong likelihood of 7% average expansion of the economy are likely to be the defining features of the new calendar year starting 1 January, according to economists 7.7% expansion in the April to September period this year, the economy is expected to sustain the growth momentum in the coming quarters at a comparable pace, economists said. According to D.K. Srivastava, chief policy adviser at EY, the Indian economy is expected to see a 7% expansion in the January to December period of 2024. If one looks at FY25, the growth is expected to be in the range of at least 6.5-7.0%, said Srivastava.“On the whole, there would be positive vibes in the economy,” said Srivastava key development expected next year that would define Centre-state fiscal relations over the five years from 2026 would be the commencement of the Sixteenth Finance Commission's consultations. The Commission will hold extensive discussions across the country to decide on the share of states in Centre's divisible pool of tax revenue and how to apportion it among states. The commission is expected to start deliberations soon after the elections year 2023 saw the Indian economy remaining a bright spot as the fastest growing major economy in the world while the global economy showed volatility and signs of slowdown though unevenly across geographies. Developed economies also faced high inflation and high-interest rates. On 8 December, the Reserve Bank of India (RBI) revised its projections for India's economic growth to 7% in FY24 against its earlier estimate of 6.5%. That was supported by an expectation-beating 7.6% expansion in the second quarter of this fiscal aided by double-digit growth in government spending and investment in fixed assets and double-digit output growth in manufacturing and construction. Household consumption is supported by durable urban demand and the gradual turnaround in rural demand, according to RBI. The 7.6% expansion in the economy in the second quarter was a major improvement from the 6.3% growth recorded in the corresponding period of the previous fiscal. The Indian economy expanded at 7.8% in the first quarter of the current fiscal, both in the government and outside, acknowledge the need for private sector investments to pick up further momentum. Debopam Chaudhuri, chief economist at Piramal Enterprises Ltd, said growth is being largely powered by public capital expenditure, which empirically has a very high multiplier effect on the rest of the economy.“However, some of the other engines of the economy need to pick up to ensure sustainability of this high growth. As far as September quarter data is concerned, private consumption, agriculture and services sectors seem to be slipping into a slow track. A revival in private capex may prove to be a catalyst for these remaining engines of growth,” said Chaudhuri.“A likely slippage in growth in FY25 down to 6.5% will further delay India's full-fledged recovery from the income loss due to covid. RBI's own estimates suggest that to restore Indian GDP to pre-covid trajectory, it will take 7-7.5% of sustained growth over the next 8-9 years,” he added October, the International Monetary Fund (IMF) had revised India's economic growth forecast for the current fiscal year to 6.3% from its earlier forecast of 6.1%, citing strong domestic consumption, while cutting its growth forecasts for China and the euro region. Following the cue, other agencies like Morgan Stanley, Citi and Goldman Sachs, too, raised GDP growth forecasts for India for FY24. While Morgan Stanley revised India's GDP growth forecast target by 50 basis points to 6.9% for FY24, Goldman Sachs revised the calendar year growth forecast by 20 basis points to 6.7%. Citi said the economy could grow 50 basis points higher than its earlier forecast to 6.7% on-year in FY24 inflation measured by consumer price index (CPI) saw a sharp spike this year. After sprinting to a 15-month high of 7.4% in July, led by an increase in food prices, it fell to a four-month low of 4.87% in October and surged to 5.5% in November deal with the surge in prices, the government strengthened buffer stock for essential food items, made periodic open market releases, imported certain commodities like onions and prevented hoarding by way of stock limits. Between September and November, CPI-based inflation stayed within the RBI's tolerance range of 4-6%. However, food prices still remain a concern, posing inflationary risks. At its latest rate-setting meeting in December, the central bank kept the repo rate unchanged at 6.5%.This year also witnessed goods and services tax (GST) related audits of companies picking up momentum, leading to notices going to several businesses about potential additional tax liability. Federal indirect tax body, the GST Council, revised the tax law to ensure online money gaming platforms, casinos and horse racing clubs pay 28% GST on the betting amount.“The (online money gaming) sector will look forward to relief on this tax and hope for a tax only on the revenue made by gaming operators and also a cut in the rate from 28% to a more reasonable rate,” said Shashi Mathews, partner at law firm INDUSLAW. GST Council will review the new tax regime on these entities next year makers expect greater adoption of the new personal income tax regime, which has been sweetened in the Union budget for FY24 and personal income tax return filings next July will show if it has the trade front, due to slowing global growth and consumption, Indian exports were impacted, but services exports turned positive in September and merchandise exports in October. India's overall exports of goods and services in the April to October period this year stood at $ 437.54 billion, a tad below the level seen in the year ago period export ban on key commodities like wheat, atta, non-basmati white rice and export restrictions on sugar impacted export growth. The export of non-Basmati white rice declined to $2.7 billion in 2023-24 in the April to September period from $6.35 billion in the same time a year ago and basmati rice export halved to $2.58 billion in the April to September period of this year from $4.78 billion in the year-ago period. Ban on non-basmati rice was imposed on 20 July 2023 to cool its domestic price's trade deficit declined in April-October of this fiscal to $57.64 billion compared to $89.86 billion in the same time a year ago.“We saw our exports arresting the decline in the month of September and turning positive in the month of October and indicators are promising for next few months, prompted by the demand of consumer durables and machineries,” said Ajay Sahai, director general of Federation of Indian Export Organisations (FIEO).The global economy has been grappling with rising inflation and high-interest rates, particularly in Europe and the United States, India's biggest export markets. However, going ahead, global trade is expected to rebound on the back of better economic growth in major advanced economies. The Export-Import Bank of India (India Exim Bank) has estimated India's merchandise export to grow at 6.3% year-on-year to $111.2 billion during the third quarter of FY24 (October-December 2023) due to a moderate increase in global demand during the festive season EU-India FTA, for which six rounds of discussions have completed, is expected to see the next round of deliberations in February next year, while the UK-India FTA is now at an advanced stage of negotiations and 14th round of negotiations is scheduled to start in January. India is also working on resolving a WTO import duty dispute with the European Union on certain products such as mobile phones and components, integrated circuits and optical instruments. A WTO dispute panel had ruled that duties imposed by India on these items violate global trading norms.

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