FICCI Economic Survey: India's Economy In Bright Spot Globally, GDP Growth Pegged At 6.3% In FY24

India continues to be a bright spot globally but needs to be watchful about inflation and geo-political developments, FICCI said while pegging the country's annual median GDP growth at 6.3%. This would be a minimum and maximum growth estimate of 6.0% and 6.6% respectively, the commerce industry said. While FICCI estimates CPI inflation at 5.5% for FY24.

The latest forecasts come after FICCI's Economic Outlook Survey which was conducted in September 2023 and drew responses from leading economists representing industry, banking and financial services sector. The economists were requested to share their forecast for key macro-economic variables for the year 2023-24 and for Q2 (July-September) FY24 and Q3 (October-December) FY24.

In a statement on Monday, FICCI said that persisting headwinds on account of geopolitical stress, slowing growth in China, lagged impact of monetary tightening and below-normal monsoons pose downside risks to growth.

According to the survey results, median GDP growth is estimated to slow down to 6.1 per cent and 6.0 per cent in Q2 2023-24 and Q3 2023-24 respectively - after posting a four-quarter high growth of 7.8 per cent in Q1 2023-24.

On sector-wise growth, FICCI's survey stated that the median growth forecast for agriculture and allied activities has been put at 2.7 per cent for 2023-24. This marks a moderation vis-à-vis growth of about 4.0 per cent reported in the year 2022-23. The El Nino effect has had an impact on the spatial distribution of rainfall this monsoon season. The industry and services sector, on the other hand, are anticipated to grow by 5.6 per cent and 7.3 per cent respectively in the current fiscal year.

Further, the median forecast for CPI-based inflation has been put at 5.5 per cent for 2023-24, with a minimum and maximum range of 5.3 per cent and 5.7 per cent respectively.

The CPI inflation rate may have peaked, but upside risks to prices remain on the fore. Prices of cereals have remained sticky. The acreage coverage of pulses and oilseeds under kharif crops has reported a contraction (as of September 30, 2023). The cancellation of the Black Sea grain deal could impact India as it imports a major share of its sunflower oil from Ukraine and Russia.

The spike in weather-related uncertainties has witnessed an increase in recent times and will continue to add to the volatility in food prices. The recent escalation in crude prices could also add to the inflation buildup, the industry body said.

Meanwhile, on RBI's policy action, economists were of the view that a cut in the repo rate is expected only by the end of Q1 or Q2 of the next fiscal year 2024-25.

Lastly, FICCI said, "On investments, participants mentioned the government's thrust on capital expenditure has led to crowding in of private investments and provided support to growth momentum. However, a full-fledged momentum in investments will take some more time to build in. It was felt that going forward any further recovery in private investments will be led by a pick-up in consumption activity - both domestic and external."