Based on the momentum in the high frequency indicators, normalised monsoon, a relatively benign global outlook and receded electoral uncertainty, both in India and in the rest of the world, growth will likely turn out to be higher than 7 percent, and possibly closer to 7.5 percent in the current fiscal, National Council of Applied Economic Research (NCAER) Director General Poonam Gupta said.
Meanwhile the Economic Survey has projected economic growth during the year to be between 6.5-7 percent in 2024-25.
“Amid signs of receding global shocks, the latest high frequency indicators like PMI expansion for manufacturing and services and bank credit growth besides forecast of above normal monsoon rains in July hold out the projected growth promise for the Indian economy,” the monthly economic review for July released by NCAER said on July 29.
The latest data point to the growth dynamism of the domestic economy with the Purchasing Managers’ Index (PMI) for both manufacturing and services increasing in June (composite PMI at 60.9) and total outstanding credit of scheduled commercial banks expanding by nearly 21 percent on a year-on-year basis.
Personal loans and credit for agriculture and allied activities expanded by nearly 29 percent and over 22 percent, respectively. India’s foreign exchange reserves reached an all-time high at $666.9 billion on July 12, giving cushion for over 11 months of projected imports.
Budget guidance on fiscal restraint is likely to keep the economy in good stead. Gupta said, “The Union Budget 2024-25 lived to the expectations of unwavering commitment to fiscal consolidation, prudence, and quality.”
The Union Budget for FY2024-25 emphasised fiscal prudence, and capex. Nominal GDP is projected to grow at 10.5 percent in FY2024-25 while the fiscal deficit is budgeted at 4.9 percent of GDP.
“The Centre's fiscal deficit reached 3 percent of the budget estimate (BE) for 2024- 25 in May 2024. As of May 2024, the fiscal deficit reached 3 percent of BE in 2024-25, as compared to 11.8 percent of BE in 2023-24, as of May 2023,” the NCAER report said.
India has remained on the path of fiscal consolidation with the fiscal deficit brought down from 6.4 percent of GDP in FY2022-23 to 5.6 percent of GDP in FY2023-24.
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