India’s economy: Will the dream run continue this year?
Mint looks at factors that can aid or disrupt the dream run. In 2023, Indian economy’s strong performance defied expectations. The 6.1% growth in the January-March quarter pushed FY23 growth to 7.2%.
April-June and July-September quarters saw heady 7.8% and 7.6% growth, respectively. The quarter ending December is seen at 6.5%. Strong capex push, rising consumption, and continued growth in the global economy contributed to this good show.
Direct tax collections grew 18% as of 9 November. Goods and Services Tax mop up (April-November) rose by 12%. The rupee remained stable.
Buoyed, foreign investors pumped in ₹1.65 trillion, sending the stock markets soaring. It could. The Reserve Bank of India has pegged FY24 GDP growth at 7%.
Fitch Ratings pegs 2024 growth at 6.6% to 6.8%. The factors that drove economic growth in 2023 remain. The focus on capital expenditure continues with states spending big.
Consumption will increase further if rural India starts spending more. Investment by corporate India is increasing catalysed by production linked incentive schemes. Inflation seems controlled and so further interest rate hikes are unlikely.
Exports are rebounding as monetary tightening has eased in developed economies as they have reined in inflation. The general election is due in May. There is no evidence that elections cause an economic bump.
In the last three elections, the economy slowed twice and grew marginally once. Experts put FY24 growth rate marginally lower than the 7.2% in FY23. Their fear is more about the risk of fiscal profligacy and its after-effects as populism has risen in recent elections.
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