Growth Engine Revs Up

The private sector had long complained of credit availability in banks. That no longer holds good. If the private sector now joins the government to invest in manufacturing and infrastructure, India’s economy can once again beat economists’ forecasts of muted growth in 2024-25

- MINHAZ MERCHANT

 WITH INDIA’S GDP in the July-September 2023 quarter beating all estimates to record growth of 7.6 per cent, is India’s economic engine now firing on all cylinders?

Other data points are positive as well. Goods and Services Tax (GST) collections in November 2023 were 15 per cent up year-on-year at Rs 1.68 lakh crore despite fewer working days in the month due to Diwali. The S&P Global India manufacturing purchasing managers’ index (PMI), a bellwether for economic activity, rose from 55.5 for October to 56 for November.

Following the surge in the BSE Sensex, the market cap of stocks listed on the BSE rose above $4 trillion for the first time. Only four countries (the United States, China, Japan and Hong Kong) have higher market caps. The BJP’s victory in three assembly elections – Rajasthan, Madhya Pradesh and Chhattisgarh – has added momentum to Indian stocks ahead of the 2024 Lok Sabha poll.

With GDP growth for the first half of 2023-24 averaging 7.7 per cent, global and Indian financial institutions have upgraded their forecasts for India’s full-year GDP growth. State Bank of India now projects India will grow at seven per cent this fiscal. Morgan Stanley projects 6.9 per cent growth in 2023-24. Barclays, Citigroup and Bank of Baroda forecast full-year growth at 6.7 per cent.

The Reserve Bank of India (RBI) has cautiously stuck to its prediction of 6.5 per cent growth in 2023-24. But for that to happen, growth in the second half of this fiscal – October 2023 to March 2024 – would need to fall to 5.3 per cent. That is unlikely to happen, even assuming the most pessimistic scenario of a spike in crude oil prices to $100 a barrel and further trade disruption due to the Russia-Ukraine war which, as sub-zero winter temperatures set in, is likely to remain stalemated.