New Delhi: According to CRISIL, India’s gross domestic product (GDP) is projected to grow at 6 per cent in the upcoming financial year 2023-24, lower than the estimated 7 per cent for the current year 2022-23.
In its report ‘Rider into the storm: Tracing India’s growth in a volatile world’ published on ThursdayThe research and ratings agency said that “in fiscal 2024, the Indian economy will grow at a slower pace, impacted by sluggish exports and the impact of rate hikes will be fully manifested”.
However, it also said that corporate revenue will continue to grow in double digits due to strong domestic demand.
On the inflation front, CRISIL predicts that retail inflation will average 5 per cent in 2023-24, lower than the average of 6.8 per cent in 2022-23 so far. This lower estimate is based on the view that “lower commodity prices, expectations of softer food prices, subdued domestic demand and a base effect” will help moderate inflation.
“India’s medium-term growth prospects are strong,” said Amish Mehta, managing director and chief executive officer of Crisil. “Over the next five fiscal years, we expect GDP to grow at an annual rate of 6.8 per cent, driven by increased capital and productivity,” Mehta said.
“It is also good to see the increasing sustainability footprint of capex (capital expenditure),” Mehta said. “Currently, about 9 per cent of infrastructure and industrial capex is green. We see this number growing to 15 per cent by FY2027.”
the story So Far
“As the Indian economy has battled the four Cs – Covid-19, conflict (geopolitical), climate change, and central bank actions – it has shown a considerable degree of resilience, especially in direct to consumption, large In the absence of fiscal pressure,” the report said.
However, CRISIL also said that the growth pattern includes and highlighted two key features. The first is that the economy has recovered marginally faster in real terms, with higher inflation accounting for the difference.
“Second, the official data revision released in February shows that the economy was more resilient than previously estimated,” it said.
Thus, it was also argued that there were four broad factors that resulted in this faster recovery than expected.
It states that first, high government spending on infrastructure building and welfare schemes allowed the construction and public administration sectors to take hold rapidly.
Second, the spurt in global demand after the pandemic gave a big boost to India’s exports, not only from the manufacturing sector, but also in terms of services such as information technology (IT) and IT-enabled services (ITES), and other professional services.
The third factor that helped was “abundant global liquidity flow into Indian markets” and “policy intervention supporting the banking and financial services sectors – from fiscal and monetary policies”.
According to CRISIL, the fourth element that greatly helped India’s post-Covid recovery was continued good rainfall, which helped the agriculture sector.
road ahead
“Slower global growth will weigh down demand for India’s exports and impact domestic industrial activity in those regions,” CRISIL wrote. , will appear in the coming months.
The report noted that ongoing geopolitical conflict will keep commodity prices higher than in pre-pandemic years and could create headwinds for growth.
On the other hand, the report said corporate balance sheets are looking healthy and a “robust” banking system and the government’s capex thrust should generate momentum and support fixed investments.
“Going forward, we expect government capex support to moderate as pressure to be fiscally strong increases,” it said.
“Meanwhile, private capex is expected to see a pick-up. Private consumption, which has been slower to recover than exports and fixed investment, has recently been driven by a pick-up in connectivity-based services, some recovery in rural incomes and resilience in urban demand,” the report said.
(Editing by Richa Mishra)