The Indian economy closed FY24 strongly with its growth surpassing market expectations, despite strong external headwinds, finance ministry economists said, adding that early indications suggest a continuation of the economic momentum during the first quarter of FY25.
The GDP number for the March quarter, which will be released on May 31, is expected to be better than anticipated with analysts pegging it at 6.8%. So, the full year FY24 may turn out to be slightly better at 7.8% than the 7.6% projected by the National Statistical Office.
The emerging robust trends in important high-frequency indicators of growth like the GST collections, e-way bills, electronic toll collections, sale of vehicles, purchasing managers’ indices and the value and number of digital transactions attest to the growing strength of the economy, according to finance ministry’s monthly economic report.
Along with growth and employment, the other macroeconomic indicators are also improving, the ministry’s economists said in the report. Retail inflation clocked 4.83% in April 2024, the lowest in the past 11 months. On the external front, despite global challenges, India’s foreign exchange reserves are comfortable, and the Indian rupee has been one of the most resilient vis-à-vis the US dollar in recent months, they said.
“The crux of the foregoing discussion is that the industrial and service sectors of the Indian economy are performing well, backed by brisk domestic demand and partially by tentative external demand,” they said.
Domestic manufacturing will likely receive stronger external support in the upcoming months.
Modestly improved economic activity and consumer sentiment in Europe and a steady US economy have aided India’s exports in April. There are reports that show that the number of organisations in the US and Europe that are focusing on reindustrialisation has increased. The majority of these organisations are focussing on enhancing supply chain resilience.
“This can benefit India’s manufacturing firms as part of the China Plus One strategy. The EXIM Bank of India has forecasted that merchandise exports will post a double-digit growth in Q1 of FY25,” they said.
The unrelenting geopolitical tensions and volatility in global commodity prices, especially of petroleum products, present substantial multi-frontal challenges, according to the report.
Nonetheless, the expectation is that the macro-economic buffers nurtured and strengthened during the post-Covid management of the economy will help the Indian economy navigate these challenges reasonably smoothly, they report noted.