The Reserve Bank of India (RBI) has set a growth target of 6.5% for the gross domestic product (GDP) forecast for FY24, but analysts believe it may be optimistic. The high baseline and slow growth of exports due to the global slowdown and rural consumption drag may result in a lower GDP forecast. Estimates from different agencies predict current financial year growth ranging from 5.5% to 6.7%. The World Bank recently revised its India GDP growth projection from 6.6% to 6.3%.
The RBI‘s projection of 6.5% growth may not materialize, according to some economists. Nomura’s MD and chief economist Sonal Verma predicts GDP growth will moderate to 5.5% due to a cyclical slowdown. Similarly, rating agency CRISIL foresees slower growth this year caused by higher borrowing costs, among other factors.
CRISIL estimates the GDP will grow at 6% in FY24, while an Axis Mutual Fund report expects growth projections to be lower than RBI expectations. The RBI remains optimistic about growth outlook, with RBI Governor Shaktikanta Das citing higher Rabi crop production, normal monsoon, buoyant services and soft inflation.
Despite healthy twin balance sheets of banks and corporates, some risks could impact the RBI‘s growth forecast, including a weak monsoon resulting from El Nino and the US Fed raising rates to 6%, among others. Bank of Baroda‘s Chief Economist, Madan Sabanavis, estimates GDP growth will be between 6% and 6.5% depending on the monsoon.
While the RBI‘s growth projections remain unchanged, analysts remain uncertain about the GDP outlook. Growth slowing could adversely affect exports and core inflation. Nonetheless, favourable conditions such as normalisation in supply chains, declining uncertainty and the potential for the capex cycle to gain momentum could boost growth in FY24.
