GDP Growth At 7.3% In Govt's Crystal Ball

(MENAFN- Live Mint) "New Delhi: Aided by sustained investment growth and robust output in manufacturing, construction and certain services, India's economy may grow at 7.3% in FY24, the government's first advance estimates showed, higher than the central bank's upwardly revised estimate of 7%.This means India will remain the world's fastest-growing major economy, following a 7.2% growth recorded in FY23. The International Monetary Fund (IMF) and the World Bank expect the Indian economy to grow at 6.3% in FY24 investment in fixed assets by the government and private sectors is expected to expand at over 10% and government spending at 4%, rising trade deficit is becoming a drag on growth, showed data from the Ministry of Statistics & Programme Implementation latest forecast comes a month after the Reserve Bank of India (RBI) revised its growth forecast to 7% for the current fiscal year, from an earlier estimate of 6.5%, on the back of robust growth in the first two quarters of the ongoing fiscal.
The Indian economy reported higher-than-expected growth of 7.8% and 7.6% during the June and September quarters of this fiscal thanks to growth in fixed investments and government spending. Real GDP in FY24 is estimated at ₹171.79 trillion against the provisional estimate of ₹160.06 trillion for FY23 released in May last year. The ministry estimates nominal GDP growth of 8.9% in FY24, lower than the 10.5% estimated in the union budget for this year, some economists expect India's full-year economic growth to range closer to the RBI's forecast of 7%, as government expenditure, which was high during the first eight months of the ongoing fiscal, is expected to slow down in the last quarter government is essentially forecasting projections for FY24 based on the April-November 2023 data available to it, said economist Pronab Sen, a former chief statistician.“But we know the government expenditure can't stay as high round the year as it was during the first eight months of the ongoing fiscal,” Sen said to the first advance estimates, the Gross Fixed Capital Formation (GFCF), which represents the capital expenditure carried out by the government and private sectors, is expected to rise by 10.3% annually to ₹59.95 trillion during FY24. GFCF had expanded 31% in the first eight months of this fiscal, and 11.4% in FY23. Private Final Consumption Expenditure (PFCE), or household spending-the biggest growth driver-is expected to rise at a moderate rate of 4.4% annually to ₹97.74 trillion this fiscal after 7.53% in the previous fiscal spending is expected to rise 4% to ₹16.41 trillion this year. Government Final Consumption Expenditure (GFCE) had remained flat in FY23 with a 0.13% annual growth, trade deficit is expected to rise to ₹8.23 trillion during FY24, up from ₹3.36 trillion during the previous fiscal. Net exports, which is a growth driver, has been in negative territory in recent years, becoming another drag on growth.A number of factors has favoured India's FY24 growth momentum, which includes better-than-expected resilience of the Indian economy, sustained government capex, deleveraged balance sheet of corporations and the banking sector, visibility in revival of a private corporate capex cycle, and sustained momentum in software services exports despite global headwinds, India Ratings said in a statement.“For a sustained PFCE growth, recovery in consumption demand has to be more broad-based where a significant contribution comes from goods and services consumed by households belonging to the lower income bracket as well. The PFCE growth in FY24 would be the slowest since FY03 (barring the covid year of FY21),” it added. According to the semi-annual economic review for FY24 released by the finance ministry last month, the Centre's capex grew by 33.7% in April-October FY24 over the corresponding period of the previous year, while capex spending by states grew at 49.8% annually during the first half of FY24.“The strength of domestic investment is the result of the government's continued emphasis on capital expenditure, which has also incentivized states to increase their capex,” the latest economic review said.“Enhanced provision for capital expenditure by the government is now leading to crowding in of private investment, as evident in several High-Frequency Indicators (HFIs) like import of capital goods, bank credit to the infrastructure sector and new projects announcements reported by private agencies,” it added first advance estimates expect the manufacturing sector to clock 6.5% growth during FY24, up from 1.3% in the previous fiscal. It also expects the agriculture sector to report a slower growth of 1.8% during the ongoing fiscal, compared to 4% in the year-ago period, which experts attributed to erratic monsoon this year.(Gireesh Chandra Prasad contributed to this story)

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