EDITORIAL JULY-SEPTEMBER ISSUE
Indian Economy On a High Growth Trajectory
India's economy begins FY 2024 with a big score.
The Indian economy has recorded an 8.4 per cent GDP growth in the October-December quarter of FY24 has "surpassed" all expectations, and the economy is on a high growth trajectory due to sustained reforms undertaken by the government. India's economic growth accelerated to 8.4 per cent in the October-December quarter of this fiscal, driven by double-digit growth in manufacturing and a good showing by mining & quarrying and construction sectors.
These strong GDP growth numbers for the third quarter (YoY) are quite surprising despite the instability due to geo-political flashpoints worldwide. Structural reforms and improvements in ease and cost of doing business have facilitated high GDP growth domestically. This gives us confidence that the Indian economy will continue to grow at a 7 per cent plus growth rate over the medium term. The double-digit expansion in manufacturing can certainly provide us with a transformative change in the economy's direction.
India's economy ended the first quarter of FY2024 on a strong note with the manufacturing sector giving good performance. The HSBC India Manufacturing Purchasing Managers' Index climbed to 58.3 from 57.5 in May. Buoyancy in demand and coming in new orders pushed up the hiring rate. GST collections have risen by 8% to Rs 1.74 lakh crore in June 2024 as against Rs.1061 lakh crore a year earlier.
Stock markets have hit another all-time high with the Sensex crossing 80K on 3rd July 2024. Passenger car sales rose further in the month from last year's high base. The RBI expects a 7.2% rise in gross domestic product in the current fiscal year.
New export orders increased again in June due to higher inflows from Asia, Australia, Brazil, Canada, Europe and the USA. A normal monsoon so far is expected to revive rural demand in the coming months.
India's automakers recorded bumper sales for 4.22 million units in FY24 growing by 27% over FY23.
India's Rating Upgrade
India's sovereign rating may be upgraded in the next 24 months if the central government can prudently manage its finances and bring down its fiscal deficit to 4% of GDP. The S&P Global Rating officials hope that the difference between government expenditure and revenue will be brought to 4.5% by 2025-26. The Indian economy has cloaked an average of 8%growth in the last three years and the medium-term growth potential is 7%.
The central government estimates to bring down the fiscal deficit to 5.1% of GDP in the current fiscal and by the next fiscal this target of 4.5% could be achieved. The US-based rating agency had in May upgraded the outlook for India to positive, from stable retaining the rate at 'BBB'. If the infrastructure bottlenecks are removed a growth potential of 8% will be there without overheating the economy. S&P estimates India's economic growth at 6.8% in the current fiscal and 8.2% in the previous fiscal. India is the fastest-growing economy in the Asia region.
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