Indian economy to grow at 7% in FY23, 6% in FY24

New Delhi/Chennai, Jan 6 The Indian economy is likely to grow at a rate of 7 per cent in the current fiscal, against the 8.7 per cent growth in 2021-22, the National Statistical Office (NSO) said on Friday.

Responding to NSO's forecast, economists are of the view that the GDP growth to moderate to 6 - 6.1 per cent in FY24.

The NSO, while releasing the first advance estimates of National Income for 2022-23, said that the "Real GDP (gross domestic product) or GDP at Constant (2011-12) Prices in the year 2022-23 is estimated at Rs 157.60 lakh crore, as against the Provisional Estimate of GDP for the year 2021-22 of Rs 147.36 lakh crore, released on May 31, 2022. The growth in real GDP during 2022-23 is estimated at 7 per cent as compared to 8.7 per cent in 2021-22".

In December 2022, the RBI had scaled down GDP growth forecast to 6.8 per cent for the current fiscal from the earlier estimate of 7 per cent, mainly due to prevailing geopolitical tensions and global tightening.

Reacting to the GDP projections Rajani Sinha, Chief Economist, CARE Ratings told IANS: "India's economy grew at 7 per cent in FY23 supported by services sector. As expected, manufacturing sector, which has been under pressure due to high input costs, recorded a weak growth. On the expenditure side, consumption growth and investment growth showed resilience aided by post-pandemic normalisation in economic activities and strong pent-up demand. Capex boost by the government has also been supportive of growth. With global growth slowing, there was a widening of net exports that ate into overall GDP growth."

Looking ahead, with challenges looming on the external front, India's export growth is likely to moderate in FY24. Manufacturing sector, will benefit from moderation in commodity prices but will feel the pain of lower external demand. In the services sector, there could be some fading of pent up demand that we saw in FY23, Sinha said.

While the government will continue its focus on capital spending, the main challenge will be a durable pick-up in private investment amid rising borrowing cost, demand uncertainty and global slowdown, she added.

"Considering the headwinds arising on external front and its possible spill overs on the Indian economy, we expect the GDP growth to moderate to around 6.1 per cent in FY24," Sinha said.

Similarly another credit rating agency CRISIL projects real GDP growth to slow to 6 per cent next fiscal, with risks tilted to the downside.

According to CRISIL, a deceleration is largely anticipated in the second half of the current year due to base effect as well as adverse impact of slowing global growth.

Recovery in household consumption and catch-up in contact-based services is expected to support growth this fiscal.

The slowdown is expected to intensify next year, as global growth falls further.

S&P Global expects the US to swing from a GDP growth of 1.8 per cent in 2022 to a contraction of 0.1 per cent in 2023, and the European Union from 3.3 per cent to 0 per cent, driven by tight financial conditions induced by rate hikes of US Federal Reserve, and the European energy crisis, CRISIL said.

"While domestic demand has stayed relatively resilient so far, it would be tested next year by weakening industrial activity. It will feel the pressure from increasing transmission of interest rate hikes to consumers as well, and as the catch-up in contact-based services fades," CRISIL added.

Be that as it may, in a significant projection, the output of the manufacturing sector is estimated to slide down to 1.6 per cent as against a growth of 9.9 per cent in 2021-22, the first advance estimate noted further.

Private final consumption expenditure, a yardstick for demand, is projected to rise 7.7 per cent 2022-23 from a year ago.

Gross fixed capital formation, a measure of investment, is estimated to rise around 11.5 per cent in the current fiscal, the data said.

Electricity sector growth in the current fiscal is estimated at 9 per cent, compared to 7.5 per cent in the previous fiscal.

Trade and hotels estimated growth is 13.7 per cent, up from last fiscal's 11.1 per cent. For finance and real estate, the estimated growth is 6.4 per cent from last fiscal's 4.2 per cent.

Estimated growth for agriculture sector is pegged at 3.5 per cent compared to the previous fiscal's 3 per cent.

Mining growth estimation is at 2.4 per cent, up from last year's 11.5 per cent.