The RBI has maintained unchanged key rates, projecting a real GDP growth of seven per cent for 2023-24. This includes Q3 at 6.5 per cent and Q4 at six per cent, with subsequent quarters in the next fiscal anticipated to grow at 6.7 per cent, 6.5 per cent, and 6.4 per cent.
Amidst the complexities of the global economy, India's strategic decision-making and strong economic foundation position it as a beacon of stability. Market sentiments have improved, with sovereign bond yields decreasing, the US dollar depreciating and global equity markets strengthening. On the domestic front, economic activity exhibits resilience, with a 7.6 per cent year-on-year GDP growth in the July-September quarter, fuelled by robust investment and government consumption.
The supply side has seen a 7.4 per cent rise in gross value added (GVA) in Q2, driven by a substantial increase in manufacturing (13.9 per cent) and construction (13.3 per cent). Ongoing strength in manufacturing, buoyant construction and a gradual rural sector recovery are expected to brighten household consumption prospects. Healthy balance sheets of banks and corporates, along with supply chain normalisation, improving business optimism and increased public and private capital expenditure will bolster investment.
Inflation, as measured by the Consumer Price Index (CPI), fell to 4.9 per cent in October. Proactive government interventions, along with adequate buffer stocks for cereals, are anticipated to keep food price pressures in check. The RBI’s enterprise surveys suggest softer growth in input costs and selling prices for manufacturing firms in Q4. CPI inflation is projected at 5.4 per cent for 2023-24.
Government expenditure recorded a robust 12.4 per cent increase in the July-September quarter, while gross fixed capital formation (investment) grew by 11 per cent. Industrial indicators showcase positive trends, with eight core industries consistently growing from June to October. Consumer and retail segments reflect encouraging signs, with double-digit expansion in urban demand, a turnaround in two-wheeler sales and a moderation in tractor sales contraction. During the festive season, retail sales of two-wheelers and passenger vehicles grew by 20.7 per cent and 10.3 per cent, respectively.
Industrial production indicators, including steel consumption (15.3 per cent), cement production (17.1 per cent) and imports of capital goods (9.4 per cent), demonstrated robust growth in October. Early survey results suggest an increase in capacity utilisation by 40 basis points to 74 per cent, surpassing the long-term average of 73.7 per cent. In trade, India's merchandise exports expanded by 6.1 per cent to $33.5 billion, while imports increased by 9.6 per cent to $63.5 billion in October. Services exports grew by 10.8 per cent.