India Ratings boosts its FY24 GDP projection to 6.2% while ADB lowers it to 6.3%

India’s FY24 growth prediction has been lowered by ADB to 6.3% because of unpredictable monsoons

On the other hand, citing continued government capital expenditure, India Ratings and Research increased its projection to 6.2%.

India Ratings and Research and the Asian Development Bank (ADB) have published opposing predictions for the country’s economic growth in the fiscal year 2024 (FY24). While India Ratings increased it to 6.2%, ADB decreased it to 6.3%. Here is a summary of their evaluations and the major variables that affected these forecasts:

ADB’s Revision: 6.3% GDP Growth in FY24 Monsoon Patterns Impact: ADB has revised India’s growth prediction down by 10 basis points to 6.3% for FY24 due in large part to irregular monsoon patterns. It is anticipated that these patterns would impact agricultural output.

Concerns about Inflation: The ADB increased its forecast for India’s inflation in FY24 from 5% to 5.5%. Unfavourable weather has caused food prices to rise, which has a negative impact on inflation in South Asia as a whole. The continued export prohibition on rice could drive up food inflation rates even more.

Positive Outlook for FY25: ADB keeps its growth forecast for FY25 at 6.7%, notwithstanding the negative revision for FY24. This upbeat forecast is predicated on assumptions that increasing private investment and industrial output will fuel economic expansion.

The View from India Ratings and Research 6.2% GDP Growth in FY24 Factors Supporting: With a 30 basis point rise, India Ratings and Research has raised its FY24 growth forecast for the country to 6.2%. They give various reasons for this upward revision, including:

Government Capital Expenditure (Capex): Continued government capex is anticipated to support economic growth.

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Balance Sheets of Corporations and Banks: Deleveraged balance sheets of corporations and banks are improving the outlook for the economy.

Global Commodity Prices: The prospect of moderate global commodity prices is often regarded as a positive development.

India Ratings and Research understands the difficulties the Indian economy would face, such as:

Global headwinds could have an effect on exports and slow down economic growth.

Tighter Financial Conditions: Tighter financial conditions may cause capital expenses to increase, which may have an effect on investment.

Meeting the government’s FY24 fiscal deficit target of 5.9% of GDP could be difficult given the poor rise in gross tax revenue.

Economic Trends: Despite a robust quarterly GDP growth of 7.8% in Q1 FY24, it is anticipated that the economic expansion will decelerate over the course of the following three quarters.

Private Capital Expenditure is showing indications of improvement, with new projects popping up in a number of states and industries.