Moody’s said the primary drivers of economic growth in 2023 and 2024 will be the Central banks’ decisions regarding how much to raise interest rates, for how long, and when to begin to lower them…reports VENKATACHARI JAGANNATHAN
Indias economic growth for 2023-24 is estimated to be in the band 6-6.5 per cent by experts in various agencies with difference only in the decimal point.
The 4.4 per cent growth (down from 6.3 per cent in the previous quarter) logged during the third quarter of FY23 was predicted by the Reserve Bank of India (RBI) couple of months back while the markets had estimated it at a slightly higher level — again difference only in the decimal point.
In December 2022 announcing the RBI’s Monetary Policy Committee’s (MPC) decision to hike the repo rate by 35 basis points to 6.25 per cent, Governor Shaktikanta Das said the real GDP growth for FY23 is projected at 6.8 per cent, with Q3 at 4.4 per cent and Q4 at 4.2 per cent.
Last month after the MPC meeting, Das said the economic growth for FY24 was projected at 6.4 per cent with Q1 at 7.8 per cent; Q2 at 6.2 per cent; Q3 at 6.0 per cent; and Q4 at 5.8 per cent.
As to the reasons for the 6.4 per cent growth Das said the expected higher rabi output has improved the prospects of agriculture and rural demand. The sustained rebound in contact-intensive sectors should support urban consumption.
“Broad-based credit growth, improving capacity utilisation, government’s thrust on capital spending and infrastructure should bolster investment activity. According to our surveys, manufacturing, services and infrastructure sector firms are optimistic about the business outlook,” Das said.
He said the protracted geopolitical tensions, tightening global financial conditions and slowing external demand are the downside risks.
On the other hand, credit rating agency CARE Ratings estimate India’s economic growth for FY24 at 6.1 per cent.
“Government focus on capex and improving intent of the private sector to invest should be supportive of investment demand. We expect GDP growth to moderate to 6.1 per cent in FY24,” Rajani Sinha, Chief Economist, CARE Ratings, told IANS.
For FY23, CARE Ratings estimates the GDP to grow by 7 per cent.
“As the external demand conditions remain weak, it is critical that domestic demand should accelerate. Improving rural demand and rising rural wages are the positive developments for aggregate demand. However, there is expected to be some fizzling out of the pent-up domestic demand seen in the last few quarters,” CARE Ratings said in a report.
The credit rating agency added that the Indian government’s focus on capex and improving intent of the private sector to invest should be supportive of investment demand but lower external demand and raising interest rates poses downside risks for investment revival.
Meanwhile, global credit rating agency Moody’s Investors Service has projected India’s growth rate at 6.5 per cent for 2024 and 5.5 per cent for 2023.
In the case of inflation rate, Moody’s has predicted 6.1 per cent for 2023 and 5.5 per cent for 2024 for India.
Moody’s said the primary drivers of economic growth in 2023 and 2024 will be the Central banks’ decisions regarding how much to raise interest rates, for how long, and when to begin to lower them.
Moody’s expects the global growth to continue to slow in 2023, with increasing drag from cumulative monetary policy tightening on economic activity and employment in most major economies.
“We forecast G20 global economic growth will downshift to 2.0 per cent in 2023 from 2.7 per cent in 2022, and then to improve to 2.4 per cent in 2024,” Moody’s said.
According to Acuite Ratings & Research’s Chief Analytical Officer Suman Chowdhury, India’s economic growth in FY23 will be close to 7.0 per cent.
“Going ahead into the next fiscal however, the factors that will play an important role are the impact of higher interest rates on urban demand, the stability of the monsoon, and the absence of the base factor; we have kept our GDP growth forecast for FY24 at 6 per cent for now without factoring in any additional risks from monsoon and external factors,” Chowdhury said.
India’s macroeconomic stability indicators will gradually improve in FY24 owing to a combination of factors like easing in global commodity prices (YoY terms), healthy growth mix (more capex driven), and fiscal and monetary policy on a consolidating path, said Morgan Stanley.