Expressing optimism about the prospects of growth in financial year 2023-24 (FY24), the Union finance ministry on Thursday said the momentum of FY23 has been carried into the new fiscal with high frequency indicators painting “a healthy picture of the state of the economy”.
“Urban demand conditions remain resilient, with higher growth in auto sales, fuel consumption and UPI (Unified Payments Interface) transactions. Rural demand is also on its path to recovery, with robust growth in two and three-wheelers sales. Goods and Services tax collection, Purchasing Managers’ Index (PMI) for the manufacturing and services sector continues to expand,” said the Monthly Economic Review for May and Annual Review of 2023 of the finance ministry.
It further noted that on the global front, the uptick in economic activity during the first quarter of 2023 has also continued in the second quarter, which was evident in the expansion of the global Composite PMI.
The economy grew by a faster than anticipated pace of 7.2% in FY23 and 6.1% in the fourth quarter. The report said the economy was able to sustain its growth momentum in FY23 on account of its strong macroeconomic fundamentals and the prompt policy action by the government and the Reserve Bank of India, despite the global slowdown.
The report also stressed that the performance of GDP growth in the fourth quarter of last fiscal was broad-based and addressed all concerns about the recovery of consumption and investment demand to the pre-pandemic growth trajectory. Further, real Private Final Consumption Expenditure (PFCE) as well as real Gross Fixed Capital Formation (GFCF) surpassed the pre-pandemic trend trajectory.
“India appears poised to sustain its growth in a more durable way than before. Nonetheless, it is no time to rest on neither laurels nor risk diluting the painstakingly and consciously achieved economic stability. If we are patient, the rising tide will lift all boats as it has begun to,” it said.
Despite unprecedented global challenges in the last few years coming on top of balance sheet troubles in Indian banking and non-financial corporate sectors, macroeconomic management has been stellar, it further said.
GDP growth is expected to slow down this fiscal amidst global headwinds to about 6%. The RBI has projected GDP growth this fiscal at 6.5%.
The report however, struck a note of caution and said listed out factors that can constrain the pace of growth including escalation of geopolitical stress, enhanced volatility in global financial systems, sharp price correction in global stock markets, high magnitude of El-Nino impact, and modest trade activity and FDI inflows owing to frail global demand.
Should these developments deepen and dampen growth in the subsequent quarters, the external sector may challenge India’s growth outlook for FY24,” it said.
