New Delhi: India’s macroeconomic outlook for the current financial year 2023-24 is bright and is solidly underpinned by strong domestic fundamentals, a Finance Ministry report has stated even as it noted the challenges arising from geo-political tensions.
The Monthly Economic Review for the month of September released on Monday highlighted the uncertainties arising from the ongoing Israel-Hamas war in the Middle East and noted that crude oil prices may push higher depending on how situations develop going forward.
Further, the report noted that the relentless supply of US Treasuries and continued restrictive monetary policy in the US could cause financial conditions to be restrictive.
“Fraught geopolitical conditions can cause a general increase in global risk aversion. If these risks worsen and are sustained, they can affect economic activity in other countries, including India,” it said.
The report said that sluggish global demand is affecting India’s trade but this is projected to recover from the second half of the current fiscal (H2FY24). It noted that with a lower trade deficit and a comfortable forex reserve position, India’s external account looks robust.
The Finance Ministry report highlighted that strong private consumption demand has been a major driver of India’s economic growth in the recent period and additional growth drivers have also emerged.
“The first is the gradual strengthening of investment demand. Investment has hitherto been propelled mainly by the capital spending of the Union Government and the crowding-in it induced for private corporate investment. While this continues unabated, increasing demand for residential properties, supported by responsive housing loan financing, has given a fillip to construction activity and the property markets,” the report said.
As per the report, the second growth driver is the firming of industrial activity, substantiated by recent data and credible perception surveys.
“Improving corporate balance sheets and their fledgling investment activity, supported by a strong and emerging banking system and financial market, makes this outlook brighter,” it said.
Mentioning about the latest upward growth revision by the International Monetary Fund (IMF), the report said that the development shows growing confidence of global analysts in India’s economic strength amidst global uncertainties and fresh geo-political challenges.