The Finance Ministry in its monthly economic review on Friday retained its growth forecast for the Indian economy at 6.5 per cent for the current financial year. But it also outlined risks from steadily climbing crude oil prices, the impact of the monsoon deficit in August on kharif and rabi crops, and a stock market correction in line with global markets, Improved corporate profitability, private capital formation, bank credit growth and construction sector activity are the “bright spots”, it said. “Crude oil prices are steadily climbing. The monsoon deficit in August could impact both Kharif and Rabi crops. That needs to be assessed. However, it is heartening that rains in September have erased a portion of the rainfall deficit at the end of August. A stock market correction, in the wake of an overdue global stock market correction, is an ever-present risk. Offsetting these risks are the bright spots of corporate profitability, private sector capital formation, bank credit growth and activity in the construction sector. In sum, we remain comfortable with our 6.5 per cent real GDP growth estimate for FY24 with symmetric risks,” the ministry said. The 7.8 per cent GDP growth recorded in the first quarter (April-June) was on account of strong domestic demand, consumption and investment, it said, adding that this growth was also witnessed in various high-frequency indicators. Noting that the strength of domestic investment is the result of the government's continued emphasis on capital expenditure, the report said, measures implemented by the central government have also incentivised states to increase their capex spending. The external demand has further complemented the domestic growth stimulus, it said, adding, the contribution of net exports to GDP growth has increased in Q1FY24, as services exports have performed well. High Frequency Indicators (HFIs) for July/August 2023 reflect sustenance of growth momentum in Q2FY24, it said. With regard to the banking sector, it said, a variety of indicators suggest increasing resilience of the sector through declining Non-Performing Assets (NPA), improving Capital to Risk-weighted Asset Ratio (CRAR), rising Return on Assets (RoA) and Return on Equity (RoE) as of March 2023. Similarly, as of March 2023, data for Non-Banking Finance Companies (NBFCs) indicated improvements in their profitability and risk-taking behaviour, it said. Further, it said, as per the July 2023 estimates by the RBI, there has been a consistent and broad-based growth in the non-food bank credit of Scheduled Commercial Banks (SCBs) since April 2022. For retail inflation, the report said, it decreased in August, with both core inflation and food inflation easing from the July figure. The calibrated measures taken by the government, including adjustments in the duties of many critical inputs and monetary policy tightening, helped reduce core inflation to a 40-month low level. Globally, food inflation remains high in many major economies, it said. In India, it said, consumer food price inflation eased to 9.9 per cent in August due to the government intervention with targeted measures for specific crops, including build-up of buffer, procurement from producing centres and subsidised distribution.
