Growth Momentum to be Sustained in Q1FY24: Finance Ministry
The current financial year’s fourth quarter will continue the growth pace established in the January through March quarter while also boosting the current account balance, according to a report from the finance ministry.
With a higher-than-anticipated expansion rate of 6.1% in Q4, the FY23 GDP growth was 7.2% as opposed to the 7% advance forecast. According to its June report, the ministry has said that India’s good monsoon performance, fiscal solid performance, sustained growth in manufacturing and services sectors, and significant spending on capital expenditure by both public and private sectors are positive signs that indicate India’s macroeconomic stability and development will continue in FY24.
The performance of several high-frequency indicators, including GST collections, PMI, services exports, and E-Way bills, showed that the growth momentum established in the March 2023 quarter is expected to be continued in the June quarter.
However, the report warned that following the projected high growth path in the current fiscal year may be challenging due to negative cross-border spillovers and unfavourable global events.
Commodity prices are firming due to better-than-anticipated expectations for global growth in the first half of 2023. Since its recent lows, the cost of Brent crude has increased by around 20%.
“More monetary tightening may be required in the developed countries due to improved economic forecasts and rising commodity prices. According to the ministry, due to repercussions on currency and capital flows, this will also impact the trajectory of monetary policy in developing nations.
It claimed that a reduced current account deficit concerning GDP during the June 2023 quarter is likely due to a smaller goods trade deficit and a stable service trade surplus. India’s current account deficit (CAD) dropped from 2% in Q3 to 4% in Q2 to 0.2% of GDP in Q4FY23.
India’s exports are anticipated to perform well despite unfavourable global events, led by robust performance in services exports.
The Finance Ministry has made an encouraging announcement predicting the continuation of economic growth momentum in the first quarter of the fiscal year 2024 (Q1FY24). This forecast comes in light of the recent economic developments, monetary policies, and efforts taken to stimulate growth within the country. This section will analyze the elements contributing to this positive outlook.
The global pandemic severely impacted the world economy, and progress towards recovery has been slow. However, the country has responded promptly through initiatives such as vaccination campaigns, fiscal stimulus packages, and support for critical industries, which have set the stage for sustained growth. Encouraging signs of recovery were seen in the fourth quarter of the previous fiscal year (Q4FY23). Industrial production, service sectors, and consumer spending all showed positive trends, giving confidence in the prediction for Q1FY24.
The government and the central bank have implemented favourable policies, such as interest rate cuts, quantitative easing, and targeted support for vulnerable industries. These measures have played a vital role in boosting consumer confidence and business investment.
Massive infrastructure projects have created employment opportunities and boosted various sectors like construction, steel, cement, and others.
The global economy’s gradual recovery and the resurgence in international trade have a positive influence, providing new export opportunities and boosting foreign investment. Adopting new technologies and digital transformation across sectors has fueled efficiency and innovation, contributing to growth.
A rise in consumer spending due to improved sentiment and government support measures has contributed to the domestic market’s overall health.
While the forecast is optimistic, some challenges could affect growth in Q1FY24:
- Inflation Pressure: Rising commodity prices may create inflationary pressures, potentially hampering growth.
- Global Uncertainties: Unforeseen global events could disrupt the international trade environment.
- Supply Chain Bottlenecks: Continued disruptions in global supply chains might lead to delays and increased business costs.
The Finance Ministry’s announcement regarding the sustained growth momentum in Q1FY24 offers hope and underlines the economy’s resilience. This positive outlook underpins strong policy support, infrastructure development, technological advancements, and improved consumer spending.
However, continuous vigilance and adaptive policy-making will be crucial to mitigate potential challenges. The focus must remain on driving inclusive growth that benefits all sectors of society while maintaining stability and sustainability in the long term.
