The real GDP in 1H of 2023-24 registered a YoY growth of 7.7% over the previous year. The real GDP in Q3 of 2023-24 registered a growth of 8.4%, indicating the sustenance of growth momentum. These estimates reaffirm the ability of the Indian economy to grow on the robustness of its domestic demand even when a rise in global uncertainties slows global output. India's real GDP expanded by 7.2% in FY23, the highest among major economies.
The nation has shifted to a modern economy, demonstrating increased global integration, and exporting a fifth of its output, a significant rise from one-sixteenth at independence. The demographic transition, marked by a lower infant mortality rate and a consistent growth in literacy rates, further enhances India's advantageous position. With improved income distribution, heightened employment rates, and globally competitive social amenity provisions, there is potential for India's per capita GDP to expand in the next 25 years, mirroring the growth seen in the preceding 75 years.
In the fiscal year 2024-25 (Interim Budget Estimate), there has been a 11.1% increase in the allocation for capital expenditure, rising from Rs. 10 lakh crore (US$ 120.6 billion) in the previous year (2023-24) to Rs. 11.11 lakh crore (US$ 134 billion). The strong growth of the Indian economy in the first half of FY24 has surpassed that of major economies, contributing to the reinforcement of macroeconomic stability.
Recently, in 2023-24, the following key indicators highlighted improved performances:
- Private consumption stood at 63.6% of the nominal GDP in Dec 2023, compared to 60.8% in last quarter same. It is supported by a rebound in contact-intensive services such as trade, hotel, and transport.
- The agricultural sector maintains robust growth, showing positive advancements in Rabi sowing, where the cultivated area has expanded from 709.09 lakh hectares in 2023-23 to 709.29 lakh hectares in 2023-24 (as on February 1, 2024). To enhance production and bolster farmers' income, elevated Minimum Support Prices (MSPs) have been declared for the upcoming Rabi Marketing Season (RMS 2023-24), ranging from 2.0 to 9.1%.
- CPI inflation eased to 5.09% in February 2024 from 5.10% in January 2024, with a decrease in both food and core inflation.
- PMI Services decreased to the levels of 60.6 in February 2024 as compared to 61.8 in January 2024.
- The consumption of petroleum products during April - February 2024 stood at 2,12,218 MMT in volume terms.
- Quick Estimates for India's Index of Industrial Production (IIP) for January 2024 stood at 153 against 151.5 for December 2023.
- In FY24, the combined index of eight core industries stood at 156 during April-January 2024.
- Cargo traffic at major ports stood at 745 million tonnes (MT) during April-February FY24.
- Railway freight traffic stood at 1434.01 MT during April-February FY24.
- During FY24 (April-January), air freight movement increased by 4.2% to 2738.13 tonnes as compared to FY23 (April- January).
- A total of 92.1 crore e-way bills were raised from April - January in FY24.
- India registered a broad-based expansion of 7% in FY23, supported by robust domestic demand and upbeat investment activity. Sectoral analysis reveals that growth was driven by demand from the services sector, and enhanced agriculture export activity was aided by increased infrastructure investment. Private consumption has peaked, marking the highest level during all second quarters in the last 11 years, accounting for 60.6% of the Gross Domestic Product (GDP). The investment rate also rose to be the highest among all the second quarters since 2012-13 at 34.6% of GDP, hinting at the beginnings of an investment cycle.
- According to the CMIE, investment proposals amounting to US$ 98.91 billion (Rs.8.2 trillion) comprising 241 projects were announced in January 2024.
- Despite the materialization of a global economic slowdown, domestic economic activity in India continues to display resilience, exemplified by the noteworthy GST collections of Rs. 1.68 lakh crore (US$ 20.26 billion) in February 2024.
- In March 2024, the Indian basket of crude oil reached US$ 83.5 a barrel, compared to US$ 81.6 in February 2024.
- In February 2024, UPI volume stood at 12,102.68 million transactions worth Rs. 18.27 lakh crore (US$ 220.41 billion).
- Merchandise exports during April-February FY24 stood at US$ 709.81 billion.
- Average daily absorptions under the liquidity adjustment facility (LAF) moderated to Rs. 1.4 lakh crore (US$ 16.8 billion) during February-March 2023 from an average of Rs. 1.6 lakh crore (US$ 19.2 billion) in December 2022-January 2023.
- As of March 8, 2024, reserve money stood at Rs. 45.41 lakh crore (US$ 547 billion).
- As of March 8, 2024, the currency in circulation (CIC) registered Rs. 34.59 lakh crore (US$ 417.1 billion).
- Rupee strength reached Rs. 82.94/US$ as of March 19, 2024.
- The total foreign direct investment (FDI) received by India in FY24 (April to December 2023) amounted to US$ 32.03 billion.
- As of March 8, 2024, India's foreign exchange reserves stood at US$ 636.09 billion.
- According to RBI:
- Bank credit stood at Rs. 160.44 trillion (US$ 1.93 trillion) as of January 26, 2024.
- Credit to non-food industries stood at Rs. 159.99 trillion (US$ 1.92 trillion) as of January 26, 2024.
India's economy outpaced other economies during the first half of FY24, propelled by robust demand and increased investment. As of February 2024, the annual retail price inflation in India eased to 5.09%, a modest drop from the previous month, staying within the tolerance band set by the Reserve Bank of India (RBI). The real investment rate during Q2 of FY23, prevailing at a high level of 34.6%, demonstrates the Government's continued commitment towards asset creation.
An overall rise in Rabi coverage with adequately filled irrigation reservoirs plays a pivotal role in the agricultural output growth in 2022-23. An increase in minimum support prices for both Kharif and Rabi crops in 2022-23 and progress in rice procurement have already been supplementing rural incomes in the country. Higher incomes have further resulted in an increase in sales of passenger vehicles, two- and three-wheelers, and tractors by a good year-on-year margin in January. The increase in GST collection, the strong generation of e-way bills, and the growth in e-toll collection serve as reaffirmations of the resilience within economic activity.
In addition, steady growth momentum in service activity continues with healthy PMI levels during October to January, attributing to the growth in output and accommodating demand conditions, leading to a sustained upturn in sales. The growth impetus in rail freight and port traffic remains upbeat, with further improvement in the domestic aviation sector. Strong growth in fuel demand, domestic vehicle sales, and high UPI transactions also reflect healthy demand conditions.
Continuous capital spending by the Government during the initial nine months amounted to Rs. 5.9 trillion (US$ 71.2 billion).
The Interim Budget for FY25 emphasizes four pivotal areas: (i) Empowering the poor (“Garib Kalyan, Desh ka Kalyan”), elevating them from poverty, reaching marginalized groups, including street vendors, tribal communities, artisans, and transgender persons, to ensure inclusive growth and leave no one behind; (ii) Welfare of farmers (“Annadata”) by providing direct financial aid, fostering inclusive growth and productivity through farmer-centric policies, income support, risk coverage, and technology promotion; (iii) Empowering the youth (“Amrit Peedhi, the Yuva”) for nation's prosperity by focusing on quality education, holistic development, and fostering entrepreneurial aspirations; and (iv) Empowerment of women (“Momentum for Nari Shakti”) through ease of living, increased participation in workforce and facilitating entrepreneurship.
Strengthening the banking and financial sector is evident, given the stability in foreign direct investment (FDI) inflows, a resurgence in Foreign Portfolio Investment (FPI) inflows, and ample foreign exchange reserves providing a robust import cover of 9 months. The external front remains resilient, contributing to the commendable performance of the INR compared to other Emerging Market Economies (EMEs).
India's services exports demonstrated robust performance during April-January period of FY24 with an estimated value of services export amounting to US$ 284.45 billion, registering a 6.35% growth compared to the same period of previous fiscal year. This growth is predominantly fuelled by the software and business services sector. With a projected 4.3% increase in global IT spending for 2023, India's services exports outlook remains favourable. The narrowing merchandise trade deficit and the upward trajectory of net services receipts are anticipated to contribute to an enhancement in India's current account deficit.
As we move ahead in 2024, the global economic landscape is anticipated to introduce further complexities, necessitating sustained vigilance to uphold India's external resilience. It is important for India to address medium-term challenges, including securing technology and resources for energy transition and skill development for the 21st-century economy. Concurrently, maintaining fiscal consolidation at the general government level is crucial.
The Indian economy shows promising signs with the RBI forecasting a 7% real GDP growth for FY25, supported by the prospects of robust rabi harvesting, manufacturing profitability, and resilient services. While risks such as geopolitical tensions and supply chain disruptions persist, lower input prices and moderated food inflation are expected to positively impact output growth and export prospects. With efforts to enhance export competitiveness and stable inflation rates, the outlook for India's economic growth remains favourable.
The collective efforts invested over the past several years have laid a robust foundation, providing a sturdy platform upon which the framework of a middle-income economy can be built.