Finmin sees downside risks to FY24 growth forecast dominate upside risks

India’s Economic Survey 2022-23 and the central bank project Indian economy to post a growth rate of 6.5 percent in 2023-24.

The downside risks to growth forecast of 6.5 percent for the current financial year dominate the upside risks, the finance ministry said on April 25.

“We reiterate that downside risks to our official forecast of 6.5 per cent for real GDP growth in FY24 dominate upside risks,” the ministry said in its monthly economic review.

The downside risks to the growth forecast include the spike in oil prices following the Organization of the Petroleum Exporting Countries’ surprise production cut; further troubles in the financial sector in advanced nations that could create risk aversion in financial markets and impede capital flows; and the El Niño weather phenomenon that has elevated the risks to Indian monsoon rains, according to the ministry.

India’s Economic Survey 2022-23 and the central bank project Indian economy to post a growth rate of 6.5 percent in 2023-24.

The authorities are working to ensure that the economy does not lose its momentum despite a slowing global economy, Finance Minister Nirmala Sitharaman said over the weekend.

India’s economy saw strong growth last fiscal year despite the impoact of Covid pandemic and headwinds of geopolitical conflicts. The economy is estimated to have grown 7 percent last fiscal, higher than the trend rate and the growth of other major economies, according to the finance ministry.

“Growing macroeconomic stability, as seen in the improved current account deficit, easing inflation pressure, and a banking system strong enough to survive the increase in policy rates, has made the growth rate further sustainable,” it added.

The International Monetary Fund projects that India will continue to be the fastest-growing economy, likely underpinned by even more robust stability in the macroeconomic variables.

The Reserve Bank of India paused its interest rate hikes at its latest meeting in April while warning that it will resume them will if required in its future meetings. Inflation has eased within its target band in March.

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Monsoon rainfall is expected to normal this year, El Niño threatens the farm output. The European war and banking crisis in the West continue to trigger uncertainties.

“It is important to be vigilant against potential risks such as El Niño conditions creating drought conditions and lowering agricultural output and elevating prices, geopolitical developments and global financial stability. All these three could affect the favourable combination of growth and inflation outcomes currently anticipated,” the finance ministry said.