High-frequency indicators (HFIs) for July-August 2023 period reflect sustenance of growth momentum from first to second quarter with the GDP expansion in the current financial year expected to be at 6.5% with risks evenly balanced, the Finance Ministry said in its monthly report on the economy Friday.
“As always, risks remain. Crude oil prices are steadily climbing. The monsoon deficit in August could impact both kharif and rabi crops. That needs to be assessed,” the ministry’s report for August noted.
However, it is heartening that rains in September have erased a portion of the rainfall deficit at the end of August, it said.
“A stock market correction, in the wake of an overdue global stock market correction, is an ever-present risk,” it said.
The private sector is in good health as data on advance tax payments for the second quarter confirm, it said.
The Centre’s advance direct tax receipts for the second quarter of the current fiscal from companies, LLPs and individuals rose by a robust 24% on year to Rs 2.38 trillion, aided by a sharp increase in income tax receipts and a rebound in corporate tax collections.
“They (private sector) are investing. The recent run-up in oil prices is an emerging concern. But, no alarms yet,” it said.
“Offsetting these risks are the bright spots of corporate profitability, private sector capital formation, bank credit growth and activity in the construction sector. In sum, we remain comfortable with our 6.5% real GDP growth estimate for FY24 with symmetric risks.”
Global rating agency Fitch last week retained India’s growth forecast for the current financial year at 6.3% citing economic resilience despite tighter monetary policy and export weakness, but projected 2023-end inflation to be higher. The Indian economy grew 7.8% in the April-June quarter of the current fiscal on strong services sector activity and robust demand.
The ministry said the strength of domestic investment is the result of the government’s continued emphasis on capital expenditure. Measures implemented by the Union Government have also incentivised States to increase their capex spending. The external demand has further complemented the domestic growth stimulus.
“The contribution of net exports to GDP growth has increased in Q1 of FY24, as services exports have performed well. HFIs for July/August 2023 reflect sustenance of growth momentum in Q2 of FY24,” it said.
High-frequency indicators like GST collection, E-way bills, PMI manufacturing, and PMI services are carrying forward the growth momentum in July-August 2023.
Globally, food inflation remains high in many major economies. In India, consumer food price inflation eased to 9.9% in August due to the government intervention with targeted measures for specific crops, including build-up of buffer, procurement from producing centres and subsidised distribution, it said.