[ad_1]
The Finance Ministry has retained its 6.5 per cent gross domestic product (GDP) growth estimate for Financial Year 2023-24 (FY24), allaying fears of worsening economic activity in the second quarter. However, it cautioned that the monsoon deficit in August could impact both kharif and rabi crops and rising crude oil prices need to be watched.
Risks are offset by the bright spots of corporate profitability, private sector capital formation, bank credit growth and activity in the construction sector, said the ministry’s Monthly Economic Review.
“India’s economic outlook for FY24 remains bright. Economic activity maintained its momentum. HFIs (high frequency indicators) suggest that the second quarter of FY24 is shaping up well too. In sum, we remain comfortable with our 6.5 per cent real GDP growth estimate for FY24 with symmetric risks,” it said.
The economy grew at a robust 7.8 per cent in the June quarter after which many economic forecasters upped their growth projections closer to 6.5 per cent.
The report noted that strong domestic demand for consumption and investment drove the GDP growth in the second quarter. “A steady decline in the urban unemployment rate has contributed to keeping private consumption strong in the economy. As strengthening consumption led to a rise in demand for goods and services, both the manufacturing and the services sectors saw their output and value-added grow robustly in Q1 of FY24.”
The monthly review said that the monsoon deficit of August had been partially plugged in September and prices of selected food items that drove the inflation rate above 7 per cent in July are retreating.
Advance tax payments for the second quarter confirm that the private sector is in good health and it is investing, said the ministry. The restructuring of the balance sheet has placed the companies in a sound position to expand their investment and become more resilient to economic shocks, the review said. “The healthy performance of the corporate sector has vindicated and strengthened investors’ confidence in the Indian growth story.”
A stock market correction, in the wake of an overdue global stock market correction, is a risk.
“Recent run-up in oil prices is an emerging concern. But no alarms yet. The US 10-year bond yield has crossed 4.3 per cent, and the S&P 500 index is not too far from its all-time high,” the monthly review said.
The ministry is confident that the impact of these developments on underlying economic activity in India should be relatively contained.
The report said indicators suggest increasing resilience of the banking sector through declining non-performing assets (NPA), improving capital to risk-weighted asset ratio (CRAR), rising return on assets (RoA) and return on equity (RoE).
“As of March 2023, data for Non-Banking Finance Companies (NBFCs) indicated improvements in their profitability and risk-taking behaviour. Further, as per the July 2023 estimates by the RBI, there has been consistent and broad-based growth in the non-food bank credit of Scheduled Commercial Banks (SCBs) since April 2022.”
[ad_2]
Source link