Indian Economy Outlook for 2024: What helped change the game in 2023; How will economy perform in 2024

The Indian equity market has emerged as one of the best-performing markets in the last two years, stated a report by Pantomath Financial Services Group. Moreover, the Domestic SIP inflows emerged as a key source of retail inflows in equities, reaching Rs 130 billion in FY2023 and is projected to reach Rs 153 billion in FY24. 

In its 2023 performance and 2024 outlook report, Pantomath said that the Indian equity market, in 2023, witnessed a phenomenal performance, as benchmark indices soared to unprecedented highs, with the Nifty and Sensex scaled milestones of 21,000 and 70,000 mark, respectively. Indian market fell relatively much lesser in CY 2022 compared to other global Markets. On the other hand, broader indices outperformed, the NSE Midcap 100 and NSE Small-cap 250 advanced 40.9 per cent and 42 per cent, respectively in CY 2023. India’s market cap is up 26 per cent in the current calendar year to $4.2 trillion. India added $900 billion in market cap in 2023, equivalent to the entire market cap of countries such as Brazil, Sweden & Netherlands.

Mahavir Lunawat, Managing Director, Pantomath Capital Advisors, said, “The Indian corporate earnings began showing improvement, with companies benefiting from a softening in commodity prices, leading to enhanced profitability and margins. Companies are expected to continue strong performance in the upcoming quarters, driven by a robust domestic demand environment, positive macroeconomic factors and private capex revival. Visible revival in private capex along with sustained pick up in govt capex bodes well. A record capex of Rs 26 lakh crore vis-à- vis Rs 10-12 lakh crore four years back will continue to foster momentum.”

Further, talking about India’s Industrial Production (IIP) growth and favourable PMI data,  Devang Shah, Head of Retail Research, and Asit C Mehta, Investment Interrmediates Limited (ACMIIL) said, “The year witnessed robust Industrial Production (IIP) growth and favourable PMI data, indicating an expansion in output at an above-trend pace. The manufacturing sector sustained its growth momentum, driven by a consistent inflow of new orders. Many companies experienced a notable uptick in sales during the festival season. While the Consumer Price Index (CPI) started to moderate from its peak levels, it remained above the Reserve Bank of India’s comfort range of 2 per cent to 4 per cent. Concerns about inflation persist, particularly in relation to the risk of an increase in food inflation, according to the RBI. The government aims to address supply issues proactively to prevent any sharp spikes in food and vegetable prices.”

Key policy reforms that changed the game in 2023

Similarly, with an eye toward overall growth and development, the central government pushed policies and initiatives in 2023 to strengthen a number of important economic sectors. 

• Production Linked Incentive for 14 key sectors to enhance India’s manufacturing capabilities and exports. 
• Over 1,14,000 startups spread across all 36 States and UTs of the country create more than 12 lakh jobs. 
• Alternative Investment Funds (AIFs) invest Rs 17,272 crores in 915 startups.
• More than 2,55,000 approvals facilitated through the National Single Window System. 
• Make in India 2.0 focusing on 27 sectors to make India a manufacturing hub 
• PM Gati Shakti becomes mainstream across the Government. 
• Unified Logistics Interface Platform successfully integrates with 35 systems of 8 ministries covering 1800+ fields.

Indian economy outlook for 2024

The momentum achieved during the CY 2023 with strategic measures by the government is indicating medium- to long-term GDP growth of India, the report said. As per S&P global Ratings, India is set to become the third-largest economy by 2030, and the paramount test for the country would be to become the next global manufacturing hub. 

“The public capex push by the government is ultimately now achieving its aim of beginning the private capex revival of Indian companies. The balance sheet of Indian companies also shows less or moderate leverage. The proactive policies of the RBI are beneficial for banks for any kind of unexpected domestic and global financial risk. Banks are also at comfortable levels, with constantly falling NPA levels and a pick-up in credit growth. The companies are also in a sound position to boost investments,” said Mahavir Lunawat, Managing Director, Pantomath Capital Advisors.  

Furthermore, the report said that India’s digital economy will continue to attract investors as technology-based solutions are sought to transform people’s lives, governance, and enterprise operations. The rapid growth in demand for online products and services is also a reflection of the increasing spending power of India’s non-metropolitan (tier-2 and tier-3) cities. The digital economy accounted for 4-4.5 per cent of the total GDP in 2014 and is currently at 11 per cent. The government projects the digital economy to make up more than 20 per cent of Indian GDP by 2026.

“Key industries beckoning foreign investors in India in 2024 include healthcare and insurance, fintech, renewable energy and climate tech, electric vehicles and automobiles, IT and services, real estate and infrastructure, FMCG, and R&D, tech innovation, and artificial intelligence (AI). These have all been on a hot streak in 2023, as foreign direct investment (FDI) policies have relaxed in recent years, and production-linked incentive (PLI) schemes have been promoted,” said Devang Shah, Head of Retail Research, Asit C Mehta Investment Interrmediates Limited (ACMIIL).

Increasing India’s participation in global value chains is a top target for both government and domestic market stakeholders. It’s what has contributed to various policy making efforts to improve the business environment and streamline compliance on one hand, as well as cultivate local competencies in niche sectors on the other. 

Deena Mehta, Group Managing Director, Asit C. Mehta Investment Interrmediates Limited (ACMIIL), said, “Emerging industries poised for investment-led growth in 2024 are battery energy storage solutions, green hydrogen, biotechnology, AVGC (animation, visual effects, gaming, comics), and semiconductor chip manufacturing, assembly, and design. Foreign companies looking at the Indian market are at an advantage as state governments are flexible and offer competitive sops to attract cutting-edge technology and generate large scale employment.” 

So far, export performance of the mobile industry is a first step in the direction of deeper supply chain engagement. Furthermore, India has intensified its decarbonization initiatives amid shifts towards renewable energy, and aims to achieve 500GW renewables capacity by 2030. 

In the corporate sector, sustainability and ESG is on the radar of top organizations and manufacturing enterprises as green tech skills will influence hiring decisions to key roles in 2024. According to an industry report by TeamLease Digital, India’s green industry is expected to add 3.7 million jobs by FY 2024-25 to the current 18.5 million.