Growth momentum gathered in the January-March quarter will be sustained in the April-June quarter of the current financial year amid the strengthening of the current account balance, the finance ministry said in a report.
With a stronger-than-expected rate of expansion of 6.1% in Q4, the FY23 GDP growth came in at 7.2%, compared with the advance estimate of 7%.
“India’s improved monsoon performance, solid fiscal performance, continued expansion in manufacturing and services sectors, vigorous capital expenditure spending by the public and private sectors augurs quite well for India’s macroeconomic stability and growth in FY24,” the ministry said in its June report.
It said growth momentum gathered in March 2023 quarter is likely to be sustained in the June quarter, as reflected in the performance of various high-frequency indicators including GST collections, PMI, services exports and E-Way bills.
However, negative cross-border spillovers and adverse global developments can act as a deterrent to achieving the potential high growth path in the current financial year, it said.
Better prospects for global growth than anticipated in the first half of 2023 mean that commodity prices are firming. The price of Brent crude is up nearly 20% from its recent lows.
“Better growth prospects and higher commodity prices mean that monetary tightening in the developed world may have further to run. That will affect the monetary policy trajectory in developing countries, too, due to currency and capital flow effects,” the ministry said.
A smaller merchandise trade deficit and a consistent service trade surplus augur well for a narrower current account deficit in relation to GDP during the June 2023 quarter, it said. India’s current account deficit (CAD) decreased to 0.2% of GDP in Q4FY23 from 2% in Q3, 4% in Q2.
Despite adverse global developments, India’s exports are also expected to perform well, driven by strong performance in services exports.