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Published: November 22, 2023
Updated: November 22, 2023

India's Economic Outlook: Resilience Amidst Challenges in FY24

Unveiling Robust Growth and Macro-Stability:

India is poised for a robust conclusion to FY24, marked by strong economic growth and macroeconomic stability, as outlined in the Finance Ministry's latest monthly economic review. However, challenges such as inflation and external factors influencing the rupee are acknowledged as potential risks to this optimistic projection.

Growth Forecasts and Economic Resilience:

In September, Fitch Ratings maintained its growth forecast for the current fiscal year at 6.3%, a sentiment echoed by S&P Global predicting a 6% GDP growth. Despite potential headwinds, India's growth in FY24 is anticipated to outshine other major economies globally, positioning the country as a positive outlier.

Monetary Policy Impact and External Factors:

The monthly economic review emphasises the impact of monetary policy transmission on domestic demand. The Reserve Bank of India (RBI), in its October meeting, maintained the repo rate at 6.5% for the fourth consecutive time. While this decision aims to curb inflation, it also has implications for economic activity.

The rupee's depreciation by 1.81% against the dollar in the last 12 months raises concerns about foreign currency borrowings and increased import costs. Monitoring these external factors becomes crucial in maintaining economic stability.

Inflationary Trends and Policy Measures:

The economic review notes the moderation of inflationary pressures, with both Consumer Price Index (CPI) and Wholesale Price Index (WPI) exhibiting favorable trends. The dip in core inflation in October contributed to a decline in CPI, aligning with the RBI's comfort zone of 2-6%.

Medium-Term Prospects and Government Measures:

Looking ahead, the review highlights India's potential for a more extended economic and financial cycle, attributing it to sustained public investment in infrastructure and advancements in digital public infrastructure. The central government's commitment to achieving budgeted deficit targets and emphasis on capital expenditure further underlines the resilience of India's economic landscape.

Global Factors and Growth Prospects:

In a comparative analysis, major global economies are expected to grow at a slower pace, reinforcing India's position as a growth leader. The government's fiscal discipline, coupled with buoyant tax collections, creates additional fiscal space for increased spending, aligning with the country's growth trajectory.

Navigating Challenges with Confidence:

India's economic outlook for FY24 showcases resilience and optimism despite potential challenges. The strategic focus on fiscal targets, coupled with proactive policy measures, positions the country to navigate global uncertainties with confidence. The journey ahead entails monitoring external factors diligently to sustain the momentum of growth and stability.