Bye Bye 2023. Welcome 2024! Indian economy has gone through many ups and downs last year. This year it is going to be more critical as not only economically but also politically as India will face National Election. The results of these elections will be more closely watch as the outcome will influence the policy framework of the economy.

Before going further first, let’s look at what the First Advance Estimates (FAE) of National Income 2023-24, released by the National Statistics Office, Ministry of Statistics and Programme Implementation says

First Advance Estimates (FAE) of National Income 2023-24

On 05^th January, 2024, NSO released the First Advance Estimates (FAE) of National Income 2023-24.

According to the press releases of FAE the Real GDP Growth rate is expected to witness a growth rate of 7.3 percent in the Financial Year (FY) 2023-24 compared to 7.2 percent in 2022-23. In terms of Nominal GDP during 2023-24 is expected at 8.9 percent in comparison to 16.1 percent in 2022-23.

The Gross Value Added (GVA) at basic prices (at constant prices) is estimated at 6.9 percent for 2023-24 compared to 7.0 percent in 2022-23. The Nominal GVA at basic prices is expected at 8.0 percent for 2023-24 compared to 15.9 percent in 2022-23.

Net Domestic Product (NDP at constant prices) is estimated at 7.4 percent for 2023-24 compared to 7.3 percent in 2022-23. The Nominal NDP is expected at 9.0 percent for 2023-24 in comparison to 17.2 percent in 2022-23.

These the major highlights of the Fist Advance Estimates of National Income 2023-24. However, the Reserve Bank of India in its Minutes of the Monetary Policy Committee Meeting, December 6 to 8, 2023, estimates the real GDP growth at 7.0 percent.

In 2023 India has emerged the fastest-growing economy in the world for the second year in a row. World has started watching India as one of the key driver of Global Economy. In this article we are going to look out the key factors or drivers of economy which we need to look out for in 2024.

Key Drivers of Economy to look out for

For any economy the major key drivers are Economic Growth, Employment, Inflation, Union Budget, Interest rates, Investments, and Infrastructure.

1. Real GDP Growth

Real GDP growth is one of the best indicators which tells how the economy is functioning. According to the Asian Development Bank (ADB), India is to witness a robust GDP growth of 6.7% in FY 2023-24 and the same 6.7% during the FY 2024-25 (Asian Development Outlook (ADO) December 2023),

On 4^th January, 2024, the United Nations released its UN World Economic Situation and Prospects (WESP) 2024 report. According to this “India is projected to reach 6.2 per cent in 2024, slightly lower than the 6.3 per cent estimate for 2023, amid robust domestic demand and strong growth in the manufacturing and services sectors.”

This means 2024 is going to be another year where India may be the fastest emerging economy. The estimate of the Real GDP growth varies from one multilateral institution to the other, but one common factor is every institution says the real GDP for the next year is going to be relatively lower than last year it will be because of a slowdown in the global economy.

2. Inflation

Inflation is always a concern for any economy. Inflation in India has gone above its tolerance limit in 2023. RBI in its minutes estimates that the annual inflation to be at 5.4% in FY 2023-24. It also went on to say that inflation will decline in the upcoming FY.

UN WESP also States that the Consumer price inflation is expected to decelerate to 4.5% in FY 2024-25, thus staying within the 2 to 6 per cent inflation target set by the RBI. The risks of surge were not ruled out by UN WESP, it went on to say that the risks could disrupt the pace of disinflation.

3. Union Budget

We all are aware that the Union Budget will be tabled on 1^st February of every year. However, this year it will be a vote of account rather than a full Budget, as this year is an election year. Therefore, there will not be many significant decisions that can be made or taken. The Fiscal Deficit (FD) will be widely watched as the 5.9 percent of FD is higher even in good times. Therefore, it is expected that FD may be reduced in the upcoming budget.

4. Interest Rates

As already many economies across the globe are talking about the interest rate cuts, India is not an exception to it. The Big question is when and to what extent the rate cut will be made. When one looks at the minutes of the RBI, it shows that the inflation forecasts would be around 5 percent till the first quarter of FY 2024-25. This means the RBI may wait and watch before it goes for the interest rate cut. There is more possibility that the RBI may go for a rate cut during the second quarter of FY 2024-25. The average repo rate has been around 6.0 to 6.5 percent for the past decade. RBI may aim it bring the repo rate to around 5.0-5.5 percent before the end of the FY 2024-25.

5. Private Investments and Infrastructure

Investments play a vital role in any economy. The FY 2023-24 has witnessed more Government investments rather than private investments. Most of the Greenfield investments for infrastructure and capex are from the Government. Though for many years economists, experts and analysts have been talking about crowding in private investments, there is not much to show in reality. Private investment in infrastructure is essential now. Moreover, the Investment rate has been stagnant for a long time now. So, let’s hope this FY 2024-25 is a little different compared to other years so far, in terms of investment.

Conclusion and Our Perspective

The above-mentioned are some of the key drivers of the economy which we must be looking for in the upcoming FY 2024-25. The robust growth rate depends on various factors including the above-mentioned. There are other factors like monsoon, human capital, etc.… which also matter for the robust growth of an economy. There is no doubt that the upcoming FY 2024-25 will be another year for India as the fastest-emerging economy in the world.

Wish you a Very Happy and Prosperous New Year.

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