India to achieve 6.5% growth in FY24 notwithstanding risks of rising crude oil prices: Finance Ministry

Exuding confidence over India’s economic growth, the finance ministry in its August edition of Monthly Economic Review has said that the country will achieve 6.5 per cent growth in FY24 on the back of improved corporate profitability, private capital formation and bank credit growth, notwithstanding the risks of rising crude oil prices and monsoon deficit. It added the 7.8 per cent growth recorded in the first quarter (April-June) was on account of strong domestic demand, consumption and investment. The growth was also witnessed in various high-frequency indicators.

Flagging certain risks like steadily climbing crude oil prices in the global market, impact of monsoon deficit in August on Kharif and Rabi crops, the review said ‘that needs to be assessed’. At the same time, it observed, the rains in September have erased a portion of the rainfall deficit at the end of August. Furthermore, it said a stock market correction, in the wake of an overdue global stock market correction, is an ever present risk, and offsetting these risks are the bright spots of corporate profitability, private sector capital formation, bank credit growth and activity in the construction sector.

Observing that the strength of domestic investment is the result of the government’s continued emphasis on capital expenditure, the review said measures implemented by the central government have also incentivised states to increase their capex spending. The external demand has further complemented the domestic growth stimulus, it said, adding, the contribution of net exports to GDP growth has increased in Q1FY24, as services exports have performed well. It said high Frequency Indicators (HFIs) for July/August 2023 reflect sustenance of growth momentum in Q2FY24.

With regard to the banking sector, it said a variety of indicators suggest increasing resilience of the 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. Similarly, as of March 2023, data for Non-Banking Finance Companies (NBFCs) indicated improvements in their profitability and risk-taking behaviour. On retail inflation, the ministry said it decreased in August, with both core inflation and food inflation easing from the July figure.