India's growth outlook may be limited by frail global demand: Ministry

If these developments deepen and dampen growth in the subsequent quarters, the external sector may challenge India’s growth outlook for fiscal 2023-24 (FY24), it said.

“India appears poised to sustain its growth in a more durable way than before,” the ministry said in its Annual Economic Review report for May.

A strong quarter pushed India’s gross domestic product (GDP) to 7.2 per cent in FY23—higher than the 7 per cent estimated in February.

Domestic demand, rising employment levels among other things, worked for India while inflation emerged as the major challenge in FY23 as it did for the rest of the world, the review noted.

“Rising employment levels further worked for India as it increased inclusivity and strengthened domestic demand,” it said.

An increase in repo rate has worked for India, enabling a 40-45 per cent of transmission in lending and deposit rates by the end of FY23, it noted.

“A critical cog in the wheel of economic growth in FY23 was the disciplined fiscal stance of the central government,” the ministry said. The year ended with a lower fiscal deficit (as per cent of GDP) compared to the previous year.

The momentum has been carried from FY23 into the current fiscal. “High-frequency indicators paint a healthy picture of the state of the economy. Urban demand conditions remain resilient,” it said, adding that rural demand is also on its path to recovery and purchasing managers’ index for the manufacturing sector continues to expand.

Fibre2Fashion News Desk (DS)