India’s GDP may grow at 5.5% to almost 6% in FY24: JP Morgan’s Aziz

Jahangir Aziz, head of emerging market economics at JP Morgan

India’s economy is likely to grow in the range of 5.5 percent to almost 6 percent in the current financial year, according to Jahangir Aziz, head of emerging market economics at JP Morgan. This is lower than the Reserve Bank of India’s 6.5 percent forecast for FY24.

Aziz said India will have an outstanding year in FY25 if it clocks a growth rate of 5.5 percent given that “the headwinds to global conditions are terrible and would be relentless in 2024.”

Global headwinds will continue to persist and intensify due to high-interest rates, geopolitical tensions and sluggish demand, according to the World Bank. Global economic growth is also set to slow down over the medium term against a background of these combined factors, it said.

The World Bank forecasts India’s GDP growth at 6.3 percent for FY24, after expanding at 7.2 percent in FY23. The expected moderation is mainly due to challenging external conditions and waning pent-up demand, the World Bank said on October 3.

In October, the RBI retained its GDP growth forecast of 6.5 percent for FY24 and FY25, although it narrowed the range of its quarterly projections for the next financial year. The central bank now estimates quarterly growth rates in FY25 in the range of 6.3-6.6 percent against the 5.5-7 percent it forecast in April.

RBI’s estimates
The RBI's growth forecast for the current year is on the higher side, with most other estimates closer to 6 percent, although there were some upward revisions in the projections following the release of GDP data for April-June.

However, growth is generally seen falling in FY25. Nomura expects India's GDP growth to moderate to 5.6 percent next year from 5.9 percent in FY24.

Data released by the statistics ministry on August 31 showed the Indian economy expanded by 7.8 percent in April-June – compared with economists' expectations of 7.8 percent but lower than the RBI's view of 8 percent.

Aziz’s view is less optimistic, given the concerns around global growth.

“The second quarter of this fiscal was already the best global year we have seen in a long, long time. So, it is not going to be surprising if India does well when the rest of the world is growing,” he said, adding that the question is whether India will grow when the world isn’t.

“India’s dependence on the global economy is significantly more than what we would like to believe. India remains driven by global factors; we just don’t like to accept it. India’s domestic economy is not enough to drive its growth. You can see how private investment has been doing – it has been languishing – and whenever it picks up, it does when global growth or exports improve,” Aziz told Moneycontrol in an interview.

Recently, RBI Governor Shaktikanta Das said that GDP growth for the second quarter of FY24 is likely to surpass expectations, based on early indicators. The central bank has projected growth of 6.5 percent for the July-September period.