NEW DELHI: The Reserve Bank of India (RBI) has retained its gross domestic product (GDP) forecast for FY24 to 6.5%. Is it too optimistic a target? Analysts feel that with a high base effect, and likely slow growth of exports owing to the global slowdown and rural consumption drag, the FY24 GDP forecast could be lower than the RBI’s 6.5% growth estimate.
The growth projections by different agencies for the current financial year vary from 5.5% to 6.7%. The World Bank recently revised its India GDP growth projection from 6.6% to 6.3%. Nomura’s MD and chief economist Sonal Verma differs from RBI’s view on growth in FY24. “GDP growth will moderate to 5.5% in FY24, below the RBI’s projection of 6.5%, due to a cyclical slowdown. We expect the RBI to lower its inflation and growth projections in coming months,” says Verma.
According to rating agency CRISIL, growth will inevitably slow this year due to higher borrowing costs, among other factors. “Bank lending rates have crossed pre-pandemic 5-year average with the transmission of past rate hikes. Private consumption has already begun showing signs of a slowdown in the past two quarters. External demand will be a bigger drag as major advanced economies face the highest rates in a decade. As growth slows, it could help ease core inflation as well by the end of this fiscal,” it stated.
Crisil expects the GDP to grow at 6% in FY24. An Axis Mutual Fund report says its estimates on growth remain lower than those of the RBI factoring base effects, a more neutral view on rural consumption trends and impact on exports due to global slowdown.
“We expect growth projections lower than RBI expectations. Two risks that would require the RBI to change tact: US Fed raising rates to 6% and El Nino & a weak monsoon resulting in high inflation,” says the Axis AMC report. In addition, according to Madan Sabanavis, Chief Economist at Bank of Baroda, the GDP growth will be in the range of 6%-6.5% depending upon the monsoon.
RBI is optimistic about the growth outlook on the back of higher Rabi crop production, expected normal monsoon, continued buoyancy in services and softening inflation due to household consumption.“On the other hand, given the healthy twin balance sheets of banks and corporates, supply chain normalisation and declining uncertainty, conditions are favourable for the capex cycle to gain momentum,” RBI Governor Shaktikanta Das said.
