FY25 outlook bright, need to watch out for CAD: Finmin

The Indian economy is experiencing strong private consumption, which is driving economic growth. Two new drivers of growth have also emerged: a gradual strengthening of investment demand and firming up of industrial activity. However, there are downside risks from global headwinds and uncertainties in weather conditions. The government aims to contain the budgeted fiscal deficit to 5.9% of GDP by FY24.

The ministry noted that with a lower trade deficit and a comfortable forex reserves position, India's external account looks robust. Echoing all this, the RBI's forward-looking surveys on manufacturing, consumer confidence, employment and inflation expectations have optimistic findings.

The comments from India's finance ministry came in an annual economic report that flagged risks in FY2024 stemming from geopolitical issues and the impact of the El Nino weather phenomenon. India's rural demand is on the path to recovery, the report said. On what is working for Indias economy, the ministry said that it sees strength in the countrys domestic demand.

OECD revised India's inflation estimates for FY24 upward to 5.8%, from the 5% projected earlier. It expects inflation to fall to 4.2% in FY25. India's inflation has averaged 6.48% for January and February, above RBI's target band of 2-6%.

The Economic Review released by the finance ministry’s department of economic affairs (DEA) said that the government’s emphasis on capital expenditure in recent years has given a much-needed thrust to investments in key infrastructure, resulting in crowding in of private investment to kick-start job creation, income, productivity, demand and exports.

Indian government’s proactive measures to improve regulations, aid infrastructure creation and keep improving the ease of doing business will continue to make India an attractive destination for foreign capital.

India's macroeconomic outlook for the 2023-24 financial year is strong, supported by robust domestic fundamentals, according to the finance ministry. The report highlights two additional drivers of growth: increasing investment demand and a rise in industrial activity. Industrial growth in India reached a 14-month high in August, and the International Monetary Fund recently raised its growth forecast for India for FY24.

Fitch emphasized that India's investment landscape is expected to be a key driver of economic growth, citing the continuation of the government's capital expenditure drive and a gradual acceleration of private investment. Despite the positive outlook, Fitch points out that beyond the fiscal year 2024, there is increased uncertainty regarding the fiscal path.

Real GDP to grow 6% in FY24, says rating agency

India's chief economic advisor, V Anantha Nageswaran, has urged for an upward revision of the country's FY24 growth forecasts to at least 7%, despite the National Statistics Office's forecast of 7.6%. The CEA believes sustained investment activity, healthy Rabi sowing, manufacturing profitability, and underlying services sector resilience will support economic activity in FY25.