India’s economy is expected to “comfortably” achieve a growth rate upwards of 6.5% in FY24 despite risks emanating from external factors, the finance ministry said in its half-yearly economic review 2023-24 report on Friday.
The Reserve Bank of India has recently projected India’s economic growth at 7% in the current fiscal year, up from 6.5% earlier.
In Q2 FY24, India’s GDP had grown 7.6%, about 60 bps higher than market expectations.
On capital spending, the financial ministry said that the government has “not compromised” on its longer-term objective of strengthening productive capital expenditure, despite slowing it down in the first two months of H2 FY24.
In H1, the year-on-year growth in capital expenditure stood at 43%, 7 percentage points higher than the Budgeted growth, which has dropped to around 30%.
Data released by the Controller General of Accounts on Friday showed that the Centre’s capital expenditure stood at Rs 5.86 trillion in April-November, 31% higher year-on-year. In October and November, the capex growth averaged (-)6.6% as against 58.9% growth recorded in H1.
“…The (Centre’s) expenditures have been re-prioritised towards the immediate requirement of safeguarding the vulnerable through the committed food subsidy, continued fertiliser subsidy and enhanced cooking gas subsidy,” the finance ministry said.
On growth, the report highlighted that high frequency indicators for October and November reflect “robust” economic activity.
S&P Global’s Purchasing Managers’ Index of manufacturing and services remained in the expansionary zone in October and November. And the October prints of IIP and eight-core industries also highlighted sustained growth in manufacturing activity, the report said.
However, the six month low core sector print of 7.8% in November indicates some loss in momentum, which may be reflected in the coming months as well.
The ministry mentioned that sentiments in the services sector remain upbeat, and growth in consumption demand is expected to be sustained. “Urban demand conditions remain resilient, with higher growth in auto sales, fuel consumption and UPI transactions.Rural demand is also catching up, as reflected in robust growth in two and three-wheelers sales,” it said.
The ministry also noted that labour markets have fully recovered from their pre-pandemic levels. “High-frequency indicators (such as EPFO, PMI) further reflect an improvement in the overall employment situation across sectors,” the report said while adding that the outlook for the employment sector appears bright, with employers intending to maintain or expand their workforce.