India Ratings revises India's GDP growth estimate for FY24 to 6.7%

India Ratings and Research on Wednesday revised India's FY24 GDP growth estimate to 6.7% from previously forecast 6.2%, citing better-than-expected growth in the September quarter, continued government investment, deleveraged balance sheet of corporates and the banking sector and the prospect of a new private business investment cycle.

However, the rating agency, part of the Fitch Group, warned that the Indian economy faces challenges from slowing exports and risks to global growth amid monetary tightening by central banks in advanced economies.

“The more restrictive monetary policy would cause global inflation to fall to 6.9% in 2023 and to 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,” it added.

Earlier in October, India Ratings and Research had revised its forecast for India's GDP growth for FY24 to 6.2% from its previous forecast of 5.9%.

The Indian economy beat expectations and registered an impressive growth of 7.6% in the July-September quarter of 2023, retaining its title as the fastest-growing major economy in the world, up sharply from 6.3% in the corresponding period of the year previous financial year.

In the April-June 2023 quarter, the Indian economy grew by 7.8%, bringing higher government and private capital expenditure and strong growth in the services sector. This led the Reserve Bank of India (RBI) to increase India's GDP growth to 7% in FY24 from its earlier estimate of 6.5%.

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

Other agencies like Morgan Stanley, Citi and Goldman Sachs have also upgraded their forecasts for India's GDP growth forecast for FY24 after the country maintained 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 expects services exports to flourish.

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 2023 US dollar in November.

Services exports stagnated at $28.69 billion in November compared to $28.70 billion in October, while services 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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