India Ratings raises India's FY24 GDP growth estimate to 6.7%

India Ratings and Research on Wednesday raised its estimate for India's GDP growth in fiscal 2023-24 to 6.7% from the earlier forecast of 6.2%, citing better-than-expected growth in the September quarter and sustained government spending.

However, the Fitch Group-owned ratings agency warned that India's economy faces challenges from slowing exports and risks to global growth amid monetary tightening by central banks in advanced economies.

“Tighter monetary policy would cause global inflation to fall to 6.9% in 2023 and 5.8% in 2024 (2022: 8.7%). Another risk that could impact global growth and trade, particularly through supply chain disruptions, is the volatile geopolitical situation,” India Ratings said.

Earlier in October, India Ratings had raised its forecast for India's GDP growth in FY24 to 6.2% from 5.9%.

India's economy exceeded expectations, posting impressive growth of 7.6% in the July-September quarter, retaining its title as the world's fastest-growing major economy. This growth was a significant increase over the September quarter of 2022, when India's GDP grew by 6.3%.

In the April-June quarter of fiscal 2024, the Indian economy grew by 7.8%, leading to higher government and private capital expenditure and strong services growth. Encouraged by this, the Reserve Bank of India increased its forecast for India's GDP growth in FY24 to 7% from its earlier estimate of 6.5%.

Earlier in October, the International Monetary Fund revised its forecast for India's economic growth in FY24 to 6.3%.

Morgan Stanley, Citi and Goldman Sachs have also upgraded their forecasts for India's GDP growth in FY24 as the economy maintains strong growth momentum in the first two quarters of the current fiscal.

While India Ratings expects weaker global trade and economic growth to be reflected in India's export growth, the company sees services exports thriving.

According to the latest Commerce Ministry data, India's merchandise exports rose marginally to $33.90 billion in November compared to $33.57 billion in October.

Meanwhile, imports fell to $54.48 billion in November compared to $65.03 billion in October, leading to a decline in the goods trade deficit to $20.58 million from $31.46 billion in October -dollar in November.

Services exports stagnated at $28.69 billion in November, while imports fell to $13.40 billion in November from $14.32 billion in the previous month.

India Ratings expects India's current account deficit to narrow to 1.3% of GDP in FY24 from 2.0% in FY23 in response to evolving domestic and global demand conditions.

“Due to uncertain external demand, merchandise exports are expected to decline by 9.3% YoY in FY24 (FY23: 6.3%) and merchandise imports are expected to decline by 7.9% YoY (due to weakening in the global commodity prices) (16.6%),” it said.

“Therefore, the trade deficit is estimated at $260.7 billion (7.3% of GDP), but sustained remittances and software exports would provide current account relief as in the past,” it added.

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