India ratings upgraded forecast for real GDP growth in FY24 upward from 5.9 to 6.2 %

On Wednesday, India Ratings and Research updated its previous forecast for real GDP growth in FY24 upward, increasing it from 5.9 to 6.2 percent.

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The local ratings agency ascribed its revision to a number of elements, notably the government's capital expenditure, the deleveraged balance sheets of India Inc. and banks, the low level of global commodity prices, and the potential for a recovery in private capital expenditure.

However, India Ratings also identified some barriers to GDP growth in the current fiscal year ahead of the general elections, including a slowdown in global growth that has hurt Indian exports, tighter financial conditions that have increased domestic capital costs, a monsoon deficit, and sluggish manufacturing growth.

According to its chief economist Sunil Kumar Sinha, all of these risks will continue to weigh on and limit India's GDP growth to 6.2% in FY24. The quarterly GDP growth, which was 7.8% in the June quarter, is also expected to slow progressively in the remaining three-quarters of FY24.

It should be highlighted that the GDP grew by 7.2% in FY23. The real GDP growth for FY24 is predicted by the RBI to be 6.5%. The agency claimed that the demand for consumption was not widespread and predicted that Private Final Consumption Expenditure (PFCE) would increase by 6.9% in FY24 compared to FY23's 7.5%.

According to the report, the real wage growth for households in the lower end of the income bracket has remained negative since the last quarter of FY21 and only recently turned marginally positive in the December quarter of FY23, while it increased between 9.5% and 12.7% for households in the upper income bracket over the same time period.

According to the agency, a 1% increase in real wages may result in a 1.12% increase in the real PFCE and a 0.64 % boost in GDP growth as a result of the multiplier effect.

According to the agency, which cited a recent Reserve Bank of India document, there are some promising signs regarding private capital expenditures.

While the services sector is recovering, the agency said that exports are still having difficulties.  However, it singled out industrial expansion and monsoon precipitation as "areas of concern."

According to the agency, retail inflation will decrease and the headline CPI will come in at 5.5% in FY24, adding that the financial environment would remain tight.

The agency cited the gross tax collection growth, which was only 2.8% in the first four months of the fiscal year compared to a 10.4% predicted in the Budget, as evidence that the government will have difficulty fulfilling the 5.9% fiscal deficit objective.

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