India’s economy to see growth above 7%, says leading think tank
The Indian economy could grow by more than 7% and could even reach 7.5% in the fiscal year (2024-25), think tank the National Council of Applied Economic Research (NCAER) is predicting.
In its July 2024 issue of Monthly Economic Review (MER), NCAER said real GDP grew by 8.2% in FY2023-24, driven by stabilising domestic consumption and steadily improving investment demand.
“Based on the momentum in the high-frequency indicators… a relatively benign global outlook and receded electoral uncertainty, both in India and in the rest of the world, growth will likely turn out to be higher than 7%, and possibly closer to 7.5%,” said NCAER director general Poonam Gupta.
He said the recent Budget has kept the fiscal deficit target at 4.9% of GDP and capital expenditure at 2.4% of GDP during 2024-25.
According to the economic think tank, the short to medium-term growth strategy is based on six key areas: private sector capital formation; green transition financing; MSME development; agricultural transformation; education and developing skills; and enhanced state capacity.
The NCAER-NSE business confidence index (BCI) increased to 149.8 in the first quarter (Q1) of FY25, up from 138.2 in the fourth quarter (Q4) of FY24, indicating an improvement in business sentiments.
NCAER’s predictions are roughly in line with the International Monetary Fund’s (IMF) revised growth projection for India, which it has hiked to 7%, while the Asian Development Bank (ADB) maintained its projection at 7% as of July 2024 for FY2024-25. The range of projections for India for the current fiscal year is between 6.6% to 7.2%.
India’s GDP grew by 8.2% in FY2023-24 due to stable consumption and improving investment demand, according to the Economic Survey 2023-24, and it is projected to grow 6.57% in FY2024-25.
Business activity accelerates in July
Meanwhile India’s business activity grew at its fastest pace in three months in July thanks to strong demand, especially in the services sector, according to the latest S&P Global survey.
It also found that hiring by Indian companies increased at the fastest pace in over 18 years.
S&P Global said the data reflected sustained growth in the private sector, which according the government said in its first budget since the national election will be given incentives to improve skills and spur employment.
HSBC’s flash India composite purchasing managers’ index (PMI), compiled by S&P Global, rose to 61.4 this month from June’s figure of 60.9, marking three years of expansion. Any score below 50 represents a contraction, while a score above 50 signifies growth.
“The Flash Composite Output Index signalled continued robust growth in India’s private sector,” said Pranjul Bhandari, chief India economist at HSBC. “The rise in output in July was led by a further increase in business activity in the manufacturing sector, while the pace of expansion in services output also accelerated and remained well above its long-run average.”
He said overall expansion was driven by the services industry, whose PMI rose to a four-month high of 61.1 this month, up from 60.5 in June. Growth in manufacturing was also strong, with factory PMI increased to 58.5 from 58.3, the highest figure since April.
S&P’s report said favourable market conditions, buoyant client appetite and enhanced technology helped the improvement in private sector activity. Both new business in the services industry and manufacturing orders remained robust.
The survey also noted that job creation rose at the fastest pace since April 2006, supporting overall business confidence at the start of this quarter, which eased to a seven-month low in June.
“Companies turned more optimistic in July, following a moderation in business confidence in June,” added Bhandari. “We note that the rate of input cost inflation continued to trend higher in both sectors, which has driven firms to keep raising sales prices.”
In fact, prices charged increased at the steepest pace in over 11 years, but the report said that robust demand allowed firms to pass on greater input costs from high material, transportation and labour prices to their clients.
