Reserve Bank of India Governor Shaktikanta Das has announced India's GDP growth forecast for 2023 -- 24 at 6.4 per cent. The Economic Survey 2023, presented by Finance Minister Nirmala Sitharaman, projected a GDP of 6 per cent -- 6.8 per cent in 2023 -- 24. The GDP number for nominal growth purposes was taken from the Union budget 2023, which took 6.5 per cent of the GDP number.
The market is not too optimistic about the growth number. In the next fiscal, CRISIL Ltd expects the GDP to be 6 per cent, according to Chief Economist Dharmakirti Joshi. Axis Mutual Fund, IDFC AMC and HDFC Bank have also pegged the GDP at around 6 per cent. HDFC Bank has gone a step forward. There is a high chance that this forecast will be revised down going forward. In FY24, we expect growth in GDP to be 5.8 per cent -- 6 per cent," said the private lender.
Why is there a consensus in market for lower FY 24 growth?
The government prefers capital expenditure over revenue expenditure, as a result of this. There is a huge increase in the capital expenditure by over 37 per cent at Rs 10 lakh crore next year. The fruits of higher capital expenditure will come over the medium to long term trm. Revenue expenditure reflects the consumption of the government in the first year. There is a cut in subsidies and schemes like MNREGA that have lower allocations under revenue expenditure.
The market will be reflected next year by the full impact of the 250 basis point repo rate hike. The banks have received 137 basis points to new borrowers and 213 basis points from depositors so far. It is actually 54 per cent if one looks at the 137 basis point transmission of rates to borrowers. This will have an impact on both retail and corporate credit demand.
Consumer price index CPI inflation, or retail inflation, will remain elevated next year. Retail inflation is projected to be 5.3 per cent in 2023 -- 24 by the RBI, showing that the RBI's target of 4 per cent is still far away. Inflation in the last year is eating away the disposable income of households.
The monetary tightening in the global financial markets is expected to have a spillover effect, as well. When global rates were low, the corporate sector was borrowing funds at a cheaper rate and private equity and venture capital money was flowing into startups and new sunrise sectors. Money is coming at a higher cost and the global players are cautious about investing money.
The rising current account deficit CAD is a concern for India as exports have already weakened due to global slowdown and imports continue to rise. The FDI and FPI have helped in financing the CAD in the past, but now there is a challenge to attract higher global flows. This could have a negative impact on the rupee value against the US dollar and cause a threat of imported inflation.