India’s Economic Growth Forecast: A Closer Look

India’s economic growth for fiscal year 2024 is a topic of considerable interest, with economists from various institutions offering differing forecasts based on recent data and trends. In this article, we delve into the latest insights provided by economists at Nomura, Morgan Stanley, BofA Global Research, Goldman Sachs, and Barclays to get a comprehensive view of India’s growth prospects.

A Positive Start in India’s Economic Growth: Q1 2023

The Indian economy made a robust start to the fiscal year, as data for the April-June quarter revealed a growth rate that exceeded expectations. Economists at Nomura and Morgan Stanley responded by raising their economic growth forecasts for fiscal year 2024.

• Nomura’s Forecast: Nomura now anticipates India’s gross domestic product (GDP) to rise by 5.9% for the year ending March 2024, up from their earlier projection of 5.5%.
• Morgan Stanley’s Forecast: Morgan Stanley revised its forecast to 6.4%, an increase from the previous estimate of 6.2%.

The impressive 7.8% annual growth in GDP for the first quarter was primarily driven by robust services activity and strong demand. This growth rate not only exceeded expectations but also marked an acceleration from the previous quarter’s 6.1% expansion, surpassing the Reuters poll forecast of a 7.7% rise.

Sustained Resilience

Upasana Chachra, chief India economist at Morgan Stanley, expressed confidence in the sustainability of this economic resilience. She cited several factors contributing to this positive outlook:

• Stronger Balance Sheets: Improved financial health across economic agents.
• Government Initiatives: Proactive supply-side measures by the government, ushering in structural reforms.

These factors collectively provide a secure foundation for a strong multi-year growth cycle, according to Chachra.

A Different Perspective: BofA Global Research

While Nomura and Morgan Stanley raised their growth forecasts, economists at BofA Global Research took a different stance. They revised down their estimate for fiscal year 2024 to 6.3% from 6.5%. The reason behind this adjustment was the significant discrepancy between the first-quarter growth rate and their earlier year-over-year (Y/Y) estimate of 9.1%.

Aastha Gudwani, an economist at BofA, highlighted a key concern: the sharp sequential decline in both GDP and Gross Value Added (GVA) for the June quarter. The quarter-on-quarter (Q/Q) GDP contraction of 7.4% was notably steep compared to a more typical 4.4% contraction in the first quarter.

Factors Impacting Forecasts

Both Nomura and BofA pointed to below-normal rainfall predictions for 2023 as a potential factor affecting agriculture growth. Additionally, Nomura adjusted its fiscal 2025 GDP growth rate down to 5.6% from 6.5%, citing several factors:

• Weak Monsoons: Unfavourable weather conditions affecting agriculture.
• Food Inflation: Higher food prices impacting consumer spending.
• Slowdown in Government Spending: A possible reduction in capital expenditure.
• Global Economic Conditions: Sluggish global growth putting pressure on domestic demand.

Consistency in Forecasts

In contrast to the varying forecasts of Nomura, Morgan Stanley, and BofA, Goldman Sachs and Barclays opted to maintain their earlier predictions for fiscal year 2024.

• Goldman Sachs: Maintained its forecast at 6.4%.
• Barclays: Retained its forecast at 6.3%, with a hint of modest upside potential.

Rahul Bajoria, Barclays’ head of EM Asia (excluding China) economics research, emphasized the role of domestic demand as an anchor for India’s GDP growth. He suggested that any moderation might come from challenges such as weaker manufacturing and exports in the event of a global economic slowdown. However, Barclays still projects steady GDP growth of 6.5% for fiscal years 2024 and 2025.

In conclusion, India’s growth forecast for fiscal year 2024 presents a range of perspectives. While some economists remain optimistic about sustained resilience and government initiatives, others express concerns about weather-related factors and global economic conditions. As the fiscal year unfolds, these forecasts will continue to be closely monitored, offering valuable insights into India’s economic trajectory.

Please note that economic forecasts are subject to change based on evolving economic conditions and data.