The year 2023 has just gone by and ended on a strong note for India’s economy. With strong growth forecasts and record infusion of funds by FPIs. There is collective optimism on the economic front based on the available indicators and performance of various sectors in 2023. There are numerous challenges covered which will need to be addressed or overcome in order to reap the benefits of the stable and increased growth forecasts.
The author wishes the esteemed readers of Asia Law Portal a very engaging, enjoyable healthy and peaceful new year.
Asian Development Bank – The Asian Development Bank recently released its Asian Development Outlook (ADO) December 2023. India’s growth projections are revised up to 6.7% from 6.3% for FY2023 (ending 31 March 2024), as per Asian Development Outlook September 2023 reported by Asia Law Portal here. The second quarter of FY2023 saw higher-than-expected GDP growth of 7.6%, causing growth in the first half to expand by a strong 7.7%. Economic data also indicate the industrial sector in particular, including manufacturing, mining, construction, and utilities, grew by double digits. For FY2023 as a whole, agriculture is expected to grow slightly slower than expected, but this will be more than offset by industry’s much stronger-than-expected growth, hence the upward revision. On the demand side, higher growth in fixed investment—driven by increased capital spending by the central government and state governments—will compensate for lower growth in private consumption expenditure and weaker-than expected exports. The growth forecast for 2024 is unchanged at 6.7%.
International Monetary Fund – The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with India. India’s economy showed robust growth over the past year. Headline inflation has, on average, moderated although it remains volatile. Employment has surpassed the pre pandemic level and, while the informal sector continues to dominate, formalization has progressed. The financial sector has been resilient—strongest in several years—and largely unaffected by global financial stress in early 2023. The current account deficit in FY2022/23 widened as the post-pandemic recovery of domestic demand and transitory external shocks outweighed the impact of robust services exports and proactive diversification of critical oil imports. While the budget deficit has eased, public debt remains elevated and fiscal buffers need to be rebuilt. Globally, India’s 2023 G20 presidency has demonstrated the country’s important role in advancing multilateral policy priorities. Growth is expected to remain strong, supported by macroeconomic and financial stability. Real GDP is projected to grow at 6.3 percent in FY2023/24 and FY2024/25, which is the same as the World Economic Outlook (WEO) October 2023 report, covered by Asia Law Portal here.
Foreign Portfolio Investors – Foreign portfolio investors (FPIs) have pumped Rs 1.7 lakh crore into the Indian equity markets in 2023, propelled by confidence in the country’s robust economic fundamentals amid a challenging global landscape. The year 2023 has witnessed massive investment by FPIs, thanks to the sharp uptick in inflows of Rs 66,134 crore in December. In 2023, FPIs made a net investment of Rs 1.71 lakh crore in equities and Rs 68,663 crore in the debt markets. Together, they infused Rs 2.4 lakh crore into the capital market, as per the data available with the depositories. In terms of sectors, FPIs preferred the financial, IT, pharma, and energy sectors, owing to the country’s strength in technology and healthcare and commitment to sustainable development contributed to the appeal for foreign investors.
Fitch on India Corporates – Fitch Ratings expects that India’s resilient economic growth will boost demand of the corporates. This follows the robust performance of the corporates in 2023 and will offset weakness from slowing growth in key overseas markets, the credit rating firm said in its latest report on ‘India Corporates: Sector Trends 2024’. Rising demand and easing input cost pressure should boost margins of the corporates in the next financial year ending March 2025 (FY25), Fitch said. Fitch said that with strong domestic demand growth, it is expected that India will be among the world’s fastest-growing countries, with resilient GDP growth of 6.5 per cent during the fiscal 2024-25.
