Indian economy to post stronger-than-expected growth in 2023-2024: RBI article

Mumbai: The Indian economy is expected to post stronger-than-expected growth in 2023-24 and the government's investment push has started attracting private investments, said an article published in the latest RBI bulletin.

The global economy faces mixed growth prospects in the near term and emerging economies, led by Asia, are poised to outperform the rest of the world, the State of the Economy article said. “The Indian economy recorded stronger-than-expected growth in 2023-2024, supported by a shift from consumption to investment,” it said.

The government's investment drive is beginning to attract private investment, said the article, written by a team led by Reserve Bank deputy governor Michael Debabrata Patra.

In India, the authors say potential production is increasing and actual production is above it, although the gap is moderate.

“In 2024-25, the aim should be to maintain this momentum by ensuring real GDP growth of at least 7 percent in an environment of macroeconomic stability,” they said.

Accordingly, inflation must adjust and anchor itself to the target by the second quarter of the year, as forecast. Financial institutions' balance sheets also need to be strengthened and asset quality needs to be further improved, the article said, adding that ongoing fiscal and external balance sheet consolidation needs to be continued.

“The benefits of current transformative technological change must be harnessed for inclusive and participatory growth in a healthy, risk-free environment. “Above all, the positive investment boost must be accompanied and even driven by government investment spending by the business sector and supplemented by foreign direct investment,” it said.

The article also highlighted that the weak global outlook can be brightened if geopolitical conflicts end and their impact on commodity and financial markets, trade and transport, and supply networks is contained.

“Inflation must be defeated to pave the way for easing financial conditions to support growth,” it added.

However, the RBI said that the views expressed in the bulletin article were the views of the authors and did not reflect the views of the central bank.