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Updated January 14th, 2024 at 12:34 IST

What are downside risks to growth in 2024?

As per NSO’s first advance estimate, FY24 GDP growth will likely stand at 7.3 per cent vs. 7.2 per cent in FY23, against the estimated growth of 7 per cent.

Business Desk
FICCI survey on India GDP growth
FICCI survey on India GDP growth | Image:Freepik
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Growth outlook: The second half of FY24 may face downward pressure, implying a downside risk to FY24 advance estimate of 7.3 per cent put out by NSO. The recovery momentum has generally been better than envisaged, led by factors like much higher positive fiscal impulse (amid front-loaded government spending) and relatively lagging negative monetary impulse (amid easier lending standards by the financial sector), the report by Emkay said. 

“Besides, robust corporate profits, leveraged consumption, and deflator-related statistical boost also pushed up H1 growth. While the terms-of-trade benefits of lower commodity prices faded slowly in Q3 (positive for firms’ operating profitability),” the report stated.

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Headwinds and Downside Risks

According to the report, the cyclical headwinds in the way of 7.3 per cent growth are: slower GoI spending growth, banks’ tightening lending standards, sub-par agri performance, and weaker exports.  India’s growth outlook remains stable, with patchy risks as we enter the new year. The growth story ahead will be influenced by  the effective fiscal impulse ahead of the general elections, pace of consumption and capex recovery, and higher global macro uncertainty and noisy geopolitics.

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As per NSO’s first advance estimate, FY24 GDP growth will likely stand at 7.3 per cent vs. 7.2 per cent in FY23, against the estimated growth of 7 per cent for FY23 by the Reserve Bank of India. 

“Slowing consumption, both private and government, as well as lower manufacturing output, are likely to drag growth, even as capital spending could remain robust,” the report mentioned. Real GVA growth is likely to be 6.9 per cent in FY24, which shows a meaningful wedge of ~40bps vs. GDP growth – the highest since COVID-19, despite modest growth in indirect taxes. 

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Advance Estimate 

Advance estimates have a short shelf life and are prone to revisions. It is important to note that advance estimates are mainly done to help the government gauge the growth outlook and tax buoyancy ahead of the budget. “They are largely an extrapolation of indicators available until November and are, thus, susceptible to significant revisions. The first advance estimate also has a short shelf life, as the second advance estimate will be released at the end of February, along with Q3FY24 data,” Emkay added.

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Published January 14th, 2024 at 12:34 IST

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