In an enlightening interview with CNBC-TV18, Nikhil Gupta, an economist at Motilal Oswal Financial Services, cast his prognosis on India's economic landscape for the financial year 2024 (FY24). Gupta put forth his belief that the Reserve Bank of India (RBI) is unlikely to cut interest rates in the forthcoming period, a stance that reflects the central bank's commitment to managing inflation and supporting economic growth.
Revised GDP Growth Forecast
Gupta has revised his firm's GDP growth forecast for India in FY24 to 6.5-6.6%. This specific figure, he emphasizes, is not a mere conjecture but is rooted in a meticulous analysis of current economic data and prevailing trends. This adjustment came even as the Indian economy registered a growth of 7.6% during the July-September quarter of the current financial year 2023-24 Q2FY24, thereby retaining its position as the fastest-growing major economy globally.
Decoding the Economic Growth
India's robust economic growth was primarily attributed to the expansion in the manufacturing and mining sector. Despite a decrease in private consumption's share in the GDP, there has been a notable rise in the share of investments, as evidenced by the Gross Fixed Capital Formation (GFCF). This growth in investments is significant for the revival of the Capital Expenditure (CapEx) cycle in the economy.
The GDP growth during the April-September period in 2023-24 stood at 7.7%, while the manufacturing sector expanded 13.9% year on year in the September quarter. India's GDP exceeded expectations in the second quarter, growing 7.6%, driven by manufacturing and construction.
Despite these promising figures, Gupta's comments underscore the RBI's possible reluctance to resort to rate cuts. This perspective suggests that despite various market factors and economic indicators, the RBI may maintain its current monetary policy stance to keep inflation in check and support economic growth, thereby setting a stable course for India's financial climate in FY24.