Industry, Services Sector To Propel India's GDP Growth At 6.3% In FY24
The latest findings from the FICCI's Economic Outlook Survey have projected a median annual GDP growth rate of 6.3 per cent for the fiscal year 2023-2024, encompassing a range from a minimum estimate of 6.0 per cent to a maximum estimate of 6.6 per cent.
The median growth prediction for agriculture and related activities during the same time period is 2.7 per cent. This reflects a moderated rise when compared to the about 4.0 per cent growth seen in the preceding fiscal year of 2022-2023. The El Nino effect, which altered the distribution of rainfall throughout the monsoon season, is blamed by the survey for this decline.
"The key factors contributing to the GDP growth projection of 6.3 per cent for 2023-24 are anticipated growth in the industry and services sectors. This growth is supported by improved consumption and investment activity, especially in the non-industrial sector, thanks to the government's focus on capital expenditure. Additionally, the contact-intensive services sector is expected to play a crucial role in driving growth," stated economists participating in the survey.
The industry and services sectors are anticipated to grow by 5.6 per cent and 7.3 per cent, respectively, in the current fiscal year.
"The primary drivers of this growth are the industry and services sectors, with expected growth rates of 5.6 per cent and 7.3 per cent, respectively. The growth in these sectors is fueled by improved consumption and investment activities, particularly in infrastructure and non-industrial areas," added experts from the survey.
Prominent economists from the banking, financial services, and industrial sectors participated in the Economic Outlook Survey, which was conducted in September 2023. These experts were asked for their opinions on the most important macroeconomic factors for 2023-24 as well as for the second and third quarters of the same fiscal year.
As a result, after a strong 7.8 per cent rise in the first quarter, the median GDP growth is forecast to fall down to 6.1 and 6.0 per cent in the second and third quarters of 2023-24.
The survey reveals ongoing obstacles to this trajectory of progress. Potential hindrances include geopolitical unrest, China's economic slowdown, the sluggish impacts of monetary tightening, and poor monsoon patterns.
"While India continues to shine on the global economic stage, the survey findings emphasise the need for vigilance due to persistent challenges. Geopolitical tensions, the deceleration of growth in China, the delayed impact of monetary tightening, and below-average monsoons all pose significant downside risks to India's economic growth," as mentioned in the survey.
Survey participants also highlighted that the CPI inflation rate is expected to remain above the Reserve Bank of India's targeted level for the remainder of the financial year. Regarding policy action by the Reserve Bank of India (RBI), economists believe that a repo rate cut is unlikely until the end of the first or second quarter of the next fiscal year, 2024-25.
The statement from the survey underlined, “The government and RBI can collaborate to control inflation through coordinated measures such as supply-side management and ensuring uninterrupted supply of essential commodities. This suggests that, given the supply-side-driven nature of inflation, monetary policy might have a limited role, and the focus should be on managing supply-side factors."
In terms of investments, the survey noted the government's emphasis on capital expenditure, which has positively influenced private investments and bolstered growth. Nevertheless, a complete recovery in private investments is expected to take more time and will likely be led by increased consumption activity, both domestically and externally.
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