The Indian economy is projected to grow by 6.3 percent in FY24 with a minimum and maximum growth estimate of 6.0 percent and 6.6 percent respectively, according to the latest Economic Outlook Survey released by the Federation of Indian Chambers of Commerce and Industry (FICCI) on Monday.
As per the chamber, the median growth forecast for agriculture and allied activities has been put at 2.7 percent for 2023-24.
“This marks a moderation vis-a-vis growth of about 4.0 percent reported in the year 2022-23. The El Nino effect has had an impact on the spatial distribution of rainfall this monsoon season. Industry and services sector, on the other hand, are anticipated to grow by 5.6 percent and 7.3 percent respectively in the current fiscal year,” it said.
The present round of FICCI’s Economic Outlook Survey was conducted in the month of September 2023 and drew responses from leading economists representing the industry, banking, and financial services sectors. The economists were requested to share their forecast for key macroeconomic variables for the year 2023-24 and for Q2 (July-September) FY24 and Q3 (October-December) FY24.
Persisting headwinds on account of geopolitical stress, slowing growth in China, lagged impact of monetary tightening, and below-normal monsoons pose downside risks to growth. According to the survey results, median GDP growth is estimated to slow down to 6.1 percent and 6.0 percent in Q2 2023-24 and Q3 2023-24 respectively – after posting a four-quarter high growth of 7.8 percent in Q1 2023-24.
Further, the median forecast for Consumer Price Index (CPI)-based inflation has been put at 5.5 percent for 2023-24, with a minimum and maximum range of 5.3 percent and 5.7 percent respectively.
The survey participants opined that the course of inflation remains uncertain. The CPI inflation rate may have peaked, but upside risks to prices remain on the fore. Prices of cereals have remained sticky. The acreage coverage of pulses and oilseeds under kharif crops has reported a contraction (as of September 30, 2023).
The cancellation of the Black Sea grain deal could impact India as it imports a major share of its sunflower oil from Ukraine and Russia. The spike in weather-related uncertainties has witnessed an increase in recent times and will continue to add to the volatility in food prices. The recent escalation in crude prices could also add to the inflation buildup.
Survey participants noted that the CPI inflation rate is expected to remain above the Reserve Bank of India’s targeted level for the remaining part of the financial year.
On RBI’s policy action, economists were of the view that a cut in the repo rate is expected only by the end of Q1 or Q2 of the next fiscal year 2024-25.
On investments, participants mentioned the government’s thrust on capital expenditure has led to crowding in of private investments and provided support to growth momentum. However, a full-fledged momentum in investments will take some more time to build in. It was felt that going forward any further recovery in private investments will be led by a pick-up in consumption activity – both domestic and external.
(With ANI inputs)
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