India Ratings raises GDP forecast to 6.7%

India Ratings and Research revised its GDP growth estimate for 2023 24 to 6.7% from an earlier projection of 6.2% citing strong second quarter growth, sustained government capex and the prospect of a new private capex cycle, even as it noted that consumption demand in the economy is not broad based.

The rating firm also attributed factors such as the deleveraged balance sheet of corporates and banks, and the sustained momentum in business and software services exports, as well as remittances from the rest of the world despite global headwinds, for its growth upgrade. Risks to global growth and merchandise trade volumes, with supply chain disruptions due to a volatile geopolitical situation, will continue to weigh on and restrict India’s GDP growth to 6.7% this year, said Sunil Kumar Sinha, principal economist at the rating firm.

The Reserve Bank of India has projected real GDP growth of 7% for the year. Noting that the current consumption demand is skewed in favour of the goods and services consumed largely by the households belonging to the upper income bracket, the rating firm said sustained real wage growth of households in the lower income bracket is an imperative for a sustainable and broad based recovery in consumption demand.

It reckoned that private final consumption expenditure (PFCE) would grow 5.2% this year, compared to 7.5% in 2022 23. While PFCE growth dropped to 3.1% in the second quarter from 6% in the first quarter, India Ratings said it could grow 5.8% in the second half of the year due to base effects. COMMents SHARE Copy link Email Facebook Twitter Telegram LinkedIn WhatsApp Reddit.