The Indian economy has carried the growth momentum from FY23 into the current fiscal year, according to an annual economic review by the Department of Economic Affairs. However, global factors can constrain the pace of growth, it said.
High-frequency indicators paint a healthy picture of the state of the economy, the review said, adding that urban demand conditions remain resilient, with rural demand on its path to recovery.
Investments in supply-side infrastructure raise the possibility that India can enjoy sustained economic growth longer than it has been able to in several decades, the report said. Strong balance sheets and digital advancements could lead to better credit decisions, allowing India's financial cycle to sustain for longer periods before encountering the challenge of bad debts. Thus, India appears poised to sustain its growth in a more durable manner than before, it said.
On the global front, the uptick in economic activity during the first quarter of 2023 has continued in the second quarter as well, as evident in the expansion of the global Composite PMI. However, factors that can constrain the pace of growth include escalation of geopolitical stress, enhanced volatility in global financial systems, sharp price correction in global stock markets, high magnitude of El-Nino impact, and modest trade activity and FDI inflows owing to frail global demand, the review said.
"Should these developments deepen and dampen growth in the subsequent quarters, the external sector may challenge India's growth outlook for FY24", the report said.
India appears poised to sustain its growth in a more durable way than before, the report concluded
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