Strong Q4 lifts FY23 GDP growth, experts discuss

India's quarter four gross domestic product (GDP) came in way above expectation at 6.1 percent. CNBC-TV18’s poll said 5.1 percent. This has pushed the full-year growth rate to 7.2 percent against market expectation of 7 percent. While experts were pleasantly surprised with the strong growth rate, they also warned of an uneven terrain going ahead.

Growth rates came in higher than analyst expectations boosted by government and private capital spending even as private consumption remained sluggish.

While A Prasanna, Chief Economist at ICICI Securities Primary Dealership,  suggested sticking with a GDP growth of 6 percent for FY24, Pranjul Bhandari, Chief India Economist at HSBC, highlighted the emerging weakness in certain sectors while also emphasizing the importance of equitable growth.

Most economists on the street have raised their GDP growth target for FY24.

According to Prasanna, maintaining a GDP growth rate of 6 percent seems plausible. Despite some concerns and challenges, the economist argued that the Indian economy is poised for moderate growth, driven by various sectors.

“Our FY24 number was 6 percent, we are retaining it,” he said.

Inflation has been a key concern for policymakers, but recent developments indicate an improvement in this area. Prasanna suggested that the RBI might hit the pause button on further policy rate hikes, taking into account the positive trend in inflation.

In a global context, the US Federal Reserve's actions often have a ripple effect on other economies, including India. Prasanna pointed out that the US Fed is expected to pause its rate hikes in June. This move, if realized, could alleviate some pressure on the Indian economy, providing a favorable external environment for growth and stability.

While there is speculation about the RBI and MPC altering their stance, Prasanna suggested that they might opt to retain their current position.

“I don’t think banks have passed on completely the rate hikes by the RBI and the MPC. I think that part will also come into play during the year, therefore, we are sticking with 6 percent,” he explained.

This indicates a cautious approach by the central bank in response to ongoing economic developments.

Even if there are no significant changes in the stance, Prasanna anticipates a dovish commentary from the RBI. A dovish tone often indicates a willingness to support growth through accommodative monetary policies, reinforcing the notion of stability and encouraging investment and economic activities.

Bhandari drew attention to the pockets of weakness within the Indian economy. While overall growth prospects remain positive, the expert highlighted the need for targeted interventions to address the vulnerabilities in certain sectors.

Bhandari emphasized the importance of equitable growth as a key aspect of India's economic journey. The focus should not only be on overall growth figures but also on ensuring that the benefits are shared by all sections of society.