In FY24, India’s gross domestic product (GDP) growth will be 6%. The Indian economy continues to show strength and stability despite the fact that the global macro economy continues to be distinguished by contradictions and dangers associated with financial system instability are becoming more prominent.
There is a distinct difference between the robustness of domestic demand, which is still present, and the impact of slowing external demand, which is reflected in reduced run-rates of merchandise exports (even though this is also partially due to a moderation in commodity prices), waning export orders within PMI, and services exports that have declined since their peak on December 22 but are still above trend.
Looking ahead, difficulties for domestic growth are anticipated to worsen in FY24 as a result of the following:
1) a slowdown in the global economy, with the additional dimension of tighter lending conditions following the turbulence in the financial sector.
2) Climate risks, particularly those associated with a warmer summer and El Nino.
3) Private capital spending is still uneven and slow.
4) the impact of rising borrowing costs on leveraged urban consumption is harmful.
The increase in public capital spending and the easing of inflationary pressures should keep the domestic economy moving in a positive direction.