Real GDP growth may hit 8% this fiscal year, signals FinMin

Ministry reckons continuing momentum in Q4 may lift FY24 growth pace above NSO’s 7.6% estimate; flags risks next year from ‘hardening oil prices’

India’s economy may well end up growing by about 8% this fiscal, outstripping the 7.6% real GDP growth projected by the National Statistical Office (NSO), the Finance Ministry signalled on Friday, citing the continuing momentum in economic activity in the ongoing final quarter of 202324.

Citing recent growth projections of 7.88% for FY24 from certain agencies, the Ministry said this inclination stemmed from the NSO’s growth estimate, which implied a 5.9% pace in Q4. This “is likely to be an understatement given the continuing momentum of the economy”.

Despite risks such as “hardening crude oil prices” and “global supply chain bottlenecks to trade”, the Ministry asserted the outlook for 202425 was bright with this fiscal closing on a positive note of ‘strong growth, stable inflation and external account and a progressive employment outlook’.

It noted that retail inflation had extended its stay inside the RBI’s tolerance range of 2%6% for a sixth month with core inflation continuing to ease. “Despite price volatility

certain specific food in items, headline inflation stayed below 6% throughout this year except in July and August,” the Ministry said in its monthly review, adding that spices and cereals had recorded the lowest inflation since August 2022 last month. For the coming months, the inflation outlook was positive, it said, citing the pickup in the sowing of summer crops, which was likely to help reduce food prices.

Arguing that robust investment activity was “clearly underway”, the Ministry said that private consumption demand was strengthening as seen in indicators like “burgeoning air passenger traffic and sale of passenger vehicles, digital payments, improved consumer confidence and expectations of a normal monsoon”. The Ministry, however, seemed to acknowledge that private consumption demand was backed by ‘resilient urban demand’ while rural demand remained weak.

‘Rural demand’

“The recovery in rural consumption demand is expected to be strengthened by the forecast of a normal monsoon,” it said. It also underlined that an increase in household savings would be necessary to finance private sector capital formation.

“On the external front, the narrowing merchandise trade deficit and the rising net services receipts are expected to result in an improvement in the current account balance in 202324. However, in 202425, the current account deficit will bear watching,” it averred, hinting at the risks to goods exports and possible oil price surges due to the Red Sea crisis and the drought in the Panama Canal.