The Indian economy has shown wonderful resilience in the first half of FY 2023-24 and is growing at 7.7% even with global headwinds. But economists remain aware and have projected GDP growth for FY24 to be between 6.5-6.7%.
The National Statistics Office (NSO) will release advance estimates for full-year GDP growth on January 5th. The economy grew 7.2% in FY23 while the government had initially budgeted for 6.5% growth in the current fiscal year.
The higher-than-expected growth in the first two quarters has led analysts to revise their forecasts upwards. But, worries about the farm sector are tempering optimism.
India Ratings and Research revised their FY24 projection to 6.7% growth, up from 6.2% earlier. They cited sustained government infrastructure spending, recovering corporate balance sheets and the prospect of a new private corporate investment cycle as reasons for their upward revision.
However weak global growth and uneven consumption demand remain risks. India Ratings expects growth to slow sequentially in the remaining two-quarters of FY24 compared to the first half.
The RBI also projects a moderation in growth in the second half with full-year GDP at 7%. The farm sector is a particular worry given its flat growth of 2.4% in the first half.
Madan Sabnavis, Chief Economist at Bank of Baroda, expects FY24 growth of around 6.6-6.7%. Despite robust growth in other sectors, weak agriculture has been a drag. Their prediction is for only 0.5-1% growth in all farm sectors this fiscal year 2k24.
Aditi Nayar of ICRA also revised her full year forecast up slightly to 6.5% but capped it there due to concerns about rural demand given weak agriculture outlook. She also pointed to potential dampening effects of election code of conduct on infrastructure spending.
Government data shows moderation in the pace of capital spending in recent months. Compared to budget estimates, capital expenditure was up just 1.8% year-on-year in the April-November period.
Suman Chowdhury of Acuité Ratings believes manufacturing will continue to drive growth while services could see some moderation. But they too have tempered their forecast to just 6% growth due to worries about a rural slowdown.
While India remains the fastest-growing major economy globally, economists are cautious in their projections for FY24. The risks around agriculture and rural demand mean growth is unlikely to match the robust first half. The consensus points to GDP expanding around 6.5-6.7% for the fiscal year.