The latest Fitch Ratings has cited a recovery in consumer spending and increased investment. File photo
| Photo Credit: The Hindu

Fitch Ratings on Tuesday, June 18, 2024, raised India’s growth forecast for current fiscal to 7.2 per cent, from 7 per cent projected in March, citing a recovery in consumer spending and increased investment.

For the fiscal years 2025-26 and 2026-27, Fitch projected growth rates of 6.5 per cent and 6.2 per cent, respectively.

“We expect the Indian economy to expand by a strong 7.2 per cent in FY24/25 (an upward revision of 0.2 pp from the March GEO),” Fitch said in its global economic outlook report.

Fitch’s estimates are in line with that of RBI which earlier this month projected Indian economy to expand 7.2 per cent in the current fiscal on the back of improving rural demand and moderating inflation.

Investment to continue, consumer spending to pick up

Investments will continue to rise but more slowly than in recent quarters, while consumer spending will recover with elevated consumer confidence, it said.

Fitch said purchasing managers survey data point to continued growth at the start of the current financial year.

It said signs of the coming monsoon season being more normal should support growth and make inflation less volatile, though a recent heatwave poses a risk.

“We expect growth in later years to slow and approach our medium-term trend estimate,” it said, adding growth will be driven by consumer spending and investment.

The Indian economy grew 8.2 per cent in the last fiscal (2023-24), with a 7.8 per cent expansion in March quarter.

Inflation, Fitch expects, will decline to 4.5 per cent by end 2024 and average 4.3 per cent in 2025 and 2026.

Fitch said it expects the RBI to cut policy interest rates by 25 basis points this year to 6.25 per cent.

New Delhi:

Finance Minister Nirmala Sitharaman on Friday termed 8.2 per cent GDP growth in 2023-24 as ‘remarkable’ and said the growth momentum will continue in the “third term of the Modi Government”.

Today’s GDP data showcases robust economic growth with a growth rate of 8.2 per cent for FY 2023-24 and 7.8 per cent for the fourth or March quarter of FY 2023-24.

“This remarkable GDP growth rate is the highest among the major economies of the world,” Nirmala Sitharaman said in a post on X.

She said the manufacturing sector witnessed a significant growth of 9.9 per cent in 2023-24, highlighting the success of the Modi government’s efforts for the sector.

Many high-frequency indicators indicate that the Indian economy continues to remain resilient and buoyant despite global challenges, she added.

“India’s growth momentum will continue in the third term of PM Shri @narendramodi-led government,” she said.

The last phase of Lok Sabha elections will be held on Saturday while the results will be announced on June 4. 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

 The Reserve Bank’s Annual Report for 2023-24 said that the Indian economy is navigating the drag from an adverse global macroeconomic and financial environment.
| Photo Credit: REUTERS

Indian economy is likely to grow at 7% in the current fiscal year starting April, the Reserve Bank of India (RBI) said in its annual report released on May 30.

The Indian economy, it said, expanded at a robust pace in 2023-24 (April 2023 to March 2024 financial year), with real GDP growth accelerating to 7.6% from 7.0% in the previous year – the third successive year of 7% or above growth.

“The real GDP growth for 2024-25 is projected at 7.0% with risks evenly balanced,” it said.

India’s GDP growth is robust on the back of solid investment demand which is supported by healthy balance sheets of banks and corporates, the government’s focus on capital expenditure and prudent monetary, regulatory and fiscal policies, the RBI said. The Reserve Bank’s Annual Report for 2023-24 said that the Indian economy is navigating the drag from an adverse global macroeconomic and financial environment.

Indian economy, the report said, is well-placed to step up growth trajectory over the next decade in an environment of macroeconomic and financial stability.

“As headline inflation eases towards the target, it will spur consumption demand especially in rural areas,” it said.

It further said the external sector’s strength and buffers in the form of foreign exchange reserves will insulate domestic economic activity from global spillovers.

The report, however, added that geopolitical tensions, geoeconomic fragmentation, global financial market volatility, international commodity price movements and erratic weather developments pose downside risks to the growth outlook and upside risks to the inflation outlook.

The RBI also emphasised that the Indian economy would have to navigate challenges posed by rapid adoption of AI/ML (artificial intelligence/machine learning) technologies as well as recurrent climate shocks.

The annual report is a statutory report of RBI’s central board of directors. The report covers the working and functions of the Reserve Bank of India for the April 2023-March 2024 period.

The Indian economy will grow at around 6.5 per cent in the current fiscal, notwithstanding high crude oil prices and increased uncertainty due climate changes, NITI Aayog member Arvind Virmani said on Thursday.

Mr. Virmani also asserted that the gross household savings ratio in India has consistently gone up.

In an interview with PTI, he said: “My growth projection (of India’s GDP growth) is 6.5 per cent plus minus 0.5 per cent… because my experience is that the fluctuations in global GDP more or less has balanced out for us, assuming normal changes.”

On some US-based economists’ claim that India is overstating economic growth, Virmani said he has noticed that certain former officials don’t have any idea how GDP is constructed as they have come from academic background.

Last week, the Finance Ministry also dismissed the criticism of inflated GDP, saying it has followed the consistent practice of using the income side estimates to compute economic growth, and stressed many international agencies have revised upwards their forecast after seeing the first quarter data.

The critics, the ministry had said, should have looked at other data like purchasing managers’ indices, bank credit growth, increase in capital expenditure and consumption patterns to assess the growth.

India’s GDP growth in 2022-23 was 7.2 per cent, lower than 9.1 per cent in 2021-22. According to Reserve Bank of India’s projections, India’s GDP is likely to grow at 6.5 per cent in the current fiscal year.

The eminent economist noted that the risk for India is “crude oil prices”. “.. if we look back 10 years ago… Saudi Arabia and the USA were more or less on the same geopolitical platform, and they used to coordinate things… but that has changed in the last five years,” Virmani said.

International crude oil prices have breached the USD 90 per barrel mark for the first time in 10 months and are currently hovering around USD 92 per barrel.

“Recently, we have seen that it (Saudi Arabia) cut down on oil production when oil prices started going to reasonable levels, and so did Russia.

According to Virmani, the issue of El Nino conditions has come up again and the uncertainty has increased because of climate change.

Responding to a question on falling household savings to five-decade low, Virmani said the net household saving is falling down, not the gross household savings.

“The gross household savings ratio has consistently gone up. The net household savings ratio is going down because consumer debt is increasing faster,” he said.

Asked whether the fall of net household savings is a matter of concern, Virmani noted that every economist who writes on macroeconomics said that the debt-to-GDP ratio in India is way too low.

“They have compared India with every country in the world, and they keep telling you that there’s a huge scope for increasing debt-to-GDP ratio in India,” he observed.

He noted that “the debt-to-GDP ratio for households in the country is not too high or unsustainable.” Responding to a question on high inflation, the eminent economist said the rise in crude oil prices will have some inflationary impact.

“Because inherently the income of the people goes down. So again, (regarding rise in) oil prices, we cannot do anything in the short-term, except manage it,” he opined.

Virmani emphasised that as far as food inflation is concerned, the government has managed it reasonably well.

Retail inflation declined to 6.83 per cent in August after touching a 15-month high of 7.44 per cent in July, mainly due to softening prices of vegetables, but still remains above the Reserve Bank’s comfort zone.

Meanwhile, India’s real GDP growth was 7.8 per cent on a year-on-year basis in Q1 FY24, as per the Income or Production Approach.

Recently, former Chief Economic Advisor Arvind Subramanian, in an article, argued that India’s GDP is not measured from the expenditure side rather than the productivity side.

Earlier this month, Chief Economic Advisor V Anantha Nageswaran rejected criticism of “statistical discrepancy” in the first quarter GDP data, saying when the same statistical authority reported the severest contraction in the first quarter of 2020, the naysayers had called it credible as it suited their narrative.

The article was written in light of debates over India’s economic performance and economist Ashoka Mody, a Princeton University professor, raising concerns regarding the country’s GDP growth rate for the first quarter of the financial year 2023-24.

India observed its 77th Independence Day this year. This analysis measures India’s relative performance in the past 76 years compared to other countries across four parameters — GDP per capita, Human Development Index (HDI), Infant Mortality Rate (IMR) and women’s participation in Parliament. Owing to technological advancement and infrastructural development, India and other countries have made remarkable progress in the past seven and half decades. So it becomes imperative to look at where India stood compared to other nations around the time of independence and where it stands now among them.

India is compared with these countries: BRICS (Brazil, Russia, China, South Africa), G-7 countries (Canada, France, Germany, Italy, the United Kingdom, and the United States), emerging economies (Argentina, Chile, Colombia, Egypt, Hungary, Indonesia, Iran, Malaysia, Mexico, the Philippines, Poland, Saudi Arabia, Thailand, Turkey, and the United Arab Emirates) and the Indian subcontinent (Bangladesh, Bhutan, Nepal, Pakistan and Sri Lanka).

Chart 1 | The chart compares GDP per capita (in $) of 26 countries between the 1960s and 2022.

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India’s GDP per capita ranking of 24 out of 26 nations analysed remained unchanged between the 1960s and 2022. While Indonesia and Nepal were lagging behind India in the 1960s, Pakistan and Nepal were lagging behind in 2022.

Chart 2 | The chart compares the Human Development Index of 31 countries between 1950 and 2021.

India’s HDI increased by 0.11 points in 1950 to 0.633 in 2021. However, India’s ranking slipped from 26 in 1950 to 29 by 2021. Of the five countries which lagged behind India in 1950, Saudi Arabia, Indonesia and Bangladesh—moved ahead by 2021, with scores of 0.87, 0.7 and 0.66 respectively.

Chart 3 | The chart compares infant mortality rates in 32 countries between 1960-1975 and 2021. 

Between 1960 and 1975, India had the seventh-worst IMR among these 32 nations. In 2021, India regressed four spots and became the third-worst. Of the six countries which were behind India in 1960-75, five (Turkey, Bangladesh, Bhutan, Egypt and Nepal) surpassed India by 2021. However, South Africa regressed.

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Chart 4 | The chart compares the share of women in Parliament in 31 countries between 1997 and 2022. 

Women’s participation in India increased from 7% in 1997-98 to 14.9% in 2022. Over 10 countries were behind India in this indicator in 1997-98. In 2022, only five remain below India.

In case of other indicators like access to electricity and usage of the internet, India has had significant progress. Between 1993 and 2000, only 50% of India’s population had access to electricity. By 2020, this increased to 99% of its population. A majority of the 32 countries considered provided electricity to over 99% of their population by 2020, except for Pakistan, South Africa and Nepal where the share remains below 90%. In 1990, almost no country considered, except for the U.S., had any access to the Internet. But by 2020, India has managed to provide internet access to 43% of its population. While India lags behind 27 countries in this indicator, Bhutan (53.5%) is the only country in the subcontinent that is ranked above India.

In 1960, with a population of 45.05 crore people, India had the second-highest population behind China (66.7 crore). By the end of 2022, India’s population stood at 1.417 billion, surpassing China’s 1.412 billion, making India the most populous country in the world, according to the World Population Review.

Source: World Bank and Our World in Data

vignesh.r@thehindu.co.in and rebecca.varghese@thehindu.co.in

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The Reserve Bank of India (RBI).
| Photo Credit: REUTERS

The RBI on August 10 retained the GDP growth projection for current fiscal year at 6.5% and raised the inflation projection marginally to 5.4% due to spike in vegetable prices, including tomatoes.

Unveiling the bi-monthly monetary policy, Reserve Bank Governor Shaktikanta Das said domestic economic activity is maintaining resilience.

He also said the recovery in kharif sowing and rural incomes, the buoyancy in services and consumer optimism should support household consumption.

“Headwinds from weak global demand, volatility in global financial markets, geopolitical tensions and geoeconomic fragmentation, however, pose risks to the outlook,” Mr. Das said.

Editorial | Optical relief: On headline inflation 

Taking all these factors into consideration, real GDP growth for 2023-24 is projected at 6.5% with Q1 at 8%; Q2 at 6.5%; Q3 at 6.0%; and Q4 at 5.7%.

Real GDP growth for Q1 of 2024-25 is projected at 6.6%.

On inflation, the Governor said the spike in vegetable prices, led by tomatoes, would exert sizeable upside pressures on the near-term headline inflation trajectory.

“This jump is, however, likely to correct with fresh market arrivals,” he said, and added there has been significant improvement in the progress of the monsoon and kharif sowing in July.

However, Mr. Das added the impact of the uneven rainfall distribution warrants careful monitoring.

Consumer Price Index (CPI) based retail inflation is projected at 5.4% for 2023-24, the Governor said.

The CPI for Q2 has been projected at 6.2%, Q3 at 5.7% and Q4 at 5.2%, with risks evenly balanced.

Also Read | Rising food prices may undo recent respite from inflation

The retail inflation for Q1 of 2024-25 is projected at 5.2%.

Headline CPI inflation picked up from 4.3% in May to 4.8% in June, driven largely by food group dynamics on the back of higher prices of vegetables, eggs, meat, fish, cereals, pulses and spices.