NEW DELHI: The finance ministry on Friday exuded confidence that the economy will “comfortably achieve” a growth rate upwards of 6.5% in FY24, as it expected the robust economic activity being witnessed in the third quarter of FY24 to continue through the March quarter as well.
In an economic review for the first half of FY24, the ministry forecast continued growth in manufacturing, upbeat sentiments in the services sector, sustained rise in consumption expenditure buoyed by resilient urban and catching-up rural demand, and much-improved current account balance.
It also expected a further moderation in headline retail inflation despite “temporary disruptions” caused by volatile food prices. Retail inflation hit a three-month high of 5.55% in November, driven partly by dearer vegetables and base effect, but remained within the central bank’s 2-6% target.
The review also flagged downside risks to growth arising from “smouldering inflationary pressures in advanced countries” and supply-chain disruptions re-emerging from persistent geopolitical stress. It pointed at geopolitics as an “independent source of risk in itself”.
“However, India’s domestic economic momentum and stability, low-to-moderate input cost pressures and anticipated policy continuity are significant buffers against those risks,” the ministry said in the review. It noted that the better-than-expected growth of 7.6% in the September quarter has prompted various domestic and international agencies to upgrade their FY24 economic growth projections for India. Notably, the Reserve Bank of India earlier this month raised its growth forecast for the country to 7% from 6.5%.
The ministry said the high-frequency indicators for the past two months reflect robust economic activity. While the PMI for both manufacturing and services remained in the expansionary zone, the index of industrial production also highlighted sustained growth in manufacturing activity. The employment sector outlook “appears bright, with employers intending to maintain or expand their workforce”.
The relatively stable Indian rupee against the dollar and other prominent currencies and adequate foreign exchange reserves add to the optimism of an upbeat external sector, the ministry said. “This sanguinity is visible in the resurgence of foreign portfolio investments since November 2023 and in FY24 in general, compared to FY23. Foreign investment inflows are also helping the Indian stock market indices to climb new heights, reflecting broad-based optimism among domestic and foreign investors on growth prospects,” it said.
Source: The Economic Times
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