The Union Finance Ministry said in its Half-Yearly Economic Review 2023-24, released on Friday (December 29), that it anticipates robust economic growth for the fiscal year 2023-24 (FY24), comfortably exceeding the 6.5% mark.
The half-yearly report points to better-than-expected growth in Q2, prompting upgrades in GDP growth projections by both domestic and international agencies for the entirety of FY24. The economic review emphasised that the momentum gained in Q2 is poised to extend into the third quarter.
"The growth witnessed in Q2 of FY24 is indicative of a strong economic recovery, and we anticipate this momentum to continue into Q3," the Finance Ministry stated. "High-Frequency Indicators (HFIs) for October and November 2023 demonstrate robust economic activity, further supporting our optimistic outlook."
The Purchasing Managers' Index (PMI) for Manufacturing and Services has remained in the expansionary zone in both October and November, showcasing the resilience of the industrial sector.
Additionally, the October 2023 data for the Index of Industrial Production (IIP) and the Index of Eight Core Industries underscore sustained growth in manufacturing activity.
The services sector, particularly the tourism and hotel industry, has experienced an upswing, driven by leisure and business travel, along with social events. Urban demand conditions remain resilient, evidenced by increased auto sales, fuel consumption, and UPI transactions. Rural demand is also on the rise, as reflected in robust growth in two and three-wheelers sales.
Commenting on inflation, the Finance Ministry acknowledged the stable downward movement in core inflation and ongoing deflation in fuel inflation. Despite temporary disruptions in food prices, the headline inflation outlook is on a declining trend. The Reserve Bank of India (RBI) has projected inflation to average at 5.4% in FY24.
Regarding the external sector, the Finance Ministry expressed optimism based on the November releases of trade balances for services and merchandise. A relatively stable Indian rupee against major currencies, along with sufficient foreign exchange reserves, adds to the positive outlook.
"Foreign investment inflows have seen a resurgence since November 2023, contributing to the climb of Indian stock market indices. This reflects broad-based optimism among domestic and foreign investors regarding growth prospects," noted the report. "While risks persist, mainly from external factors, we are confident that the Indian economy will comfortably achieve a growth rate exceeding 6.5% in FY24."
(Edited by : Shoma Bhattacharjee)
First Published: Dec 29, 2023 8:01 PM IST
