The economic growth forecasts for India have not seen much change in the near term as per updates provided by international financial institutions. The detailed reporting by Asian Development Bank is noteworthy and provides insights into the performance in the past few months, together with projections for the future. There are some proposed developments in the offing relating to the new data protection law which was enacted in August.

Asian Development Bank  – The Asian Development Bank (ADB) recently released its Asian Development Outlook September 2023. For India, the report mentioned that despite global uncertainties, the economy showed robust growth in the first quarter (Q1) of fiscal year 2023 (FY2023, ending 31 March 2024), driven by strong government and private investment and private consumption. The growth forecast for FY2023 is modestly lowered from the projection in ADO April 2023 (reported by Asia Law Portal here) due to lower-than expected agricultural output but retained for FY2024 as corporate profitability and strong bank credit buoy private investment. Inflation has moderated broadly, but the forecast for FY2023 is raised owing to a spike in food prices, and the forecast for FY2024 is marginally lowered as core inflation moderates. GDP growth forecast is revised down from the ADO April 2023 projection to 6.3% in FY2023 and maintained at 6.7% for FY2024.

On balance, India’s economic growth will be resilient and strong. The lower FY2023 growth forecast takes into account the impact of extreme rainfall spatial patterns on kharif output, while the forecast for FY2024 assumes that rising private investments and industrial expansion will propel growth. Foreign direct investment declined during the first 2 months of FY2023, but foreign portfolio investment flows were strong. Net foreign direct investment declined to $5 billion in Q1 FY2023 from $13.4 billion in Q1 FY2022. This was balanced by a strong increase in net portfolio investment despite tighter monetary policy globally, from net outflows of $14.0 billion in Q1 FY2022 to net inflows of $15 billion. Due to a lower trade deficit and high growth in personal remittances, the current account deficit decreased from 2.0% of GDP in Q3 FY2022 to 0.2% of GDP in Q4 FY2022. Foreign exchange reserves remained robust and covered 11 months of imports at the end of July 2023. The rupee–dollar exchange rate was relatively stable in the first 4 months of FY2023 at an average value of ₹82.19 per dollar, almost unchanged from the end of FY2022.

Fitch RatingsFitch Ratings recently said the pace of India’s growth in the third quarter of 2023-24 is likely to moderate as exports continue to weaken, credit growth flatlines and the Reserve Bank of India’s (RBI) latest bimonthly consumer confidence survey shows consumers becoming a little more pessimistic on income and employment prospects. “Temporary increases in inflation, in particular rising food inflation, in coming months could curb households’ discretionary spending power,” Fitch said in its September Global Economic Outlook (GEO). “Our expectation is that retail inflation now ends 2023 at 5.5 per cent, higher than our previous forecast of 5 per cent. The inflation impact on consumers may be temporary but other more fundamental factors are weighing on the economy,” it said. “India will not be immune to the global economic slowdown and the domestic economy will be affected by the lagged impact of the RBI’s 250 bps of hikes in the past year, while a poor monsoon season could complicate the RBI’s control of inflation,” it said. It has kept the growth forecasts unchanged (6.3 per cent) from June’s GEO.

MoodysMoody’s Investors Service has raised India’s growth projection for 2023 calendar year to 6.7 per cent on account of robust economic momentum. “Strong services expansion and capital expenditures propelled India’s 7.8 per cent real GDP growth in the second (April-June) quarter from a year ago. We have accordingly raised our 2023 calendar year growth forecast for India from 5.5 per cent to 6.7 per cent,” Moody’s said in its Global Macro Outlook. “Given the robust underlying economic momentum, we also recognise further upside risk to India’s economic growth performance,” it added Moody’s said since the second quarter outperformance creates a high base in 2023, “we have lowered our 2024 growth forecast from 6.5 per cent to 6.1 per cent”.

India’s monsoon season which runs from June to October could also see below average rainfall, resulting in higher food prices. If El Niño this year proves to be particularly strong in the second half of 2023 and early 2024, agricultural commodity prices could shoot up, Moody’s added. “Domestic demand in India remains buoyant, and as long as core inflation remains relatively stable, rate hikes are also unlikely,” Moody’s said.

Update on Data Protection LawThe government will set up the Data Protection Board (DPB), the appellate authority for grievance redressal under the Digital Personal Data Protection Act (Act), within the next 30 days, Rajeev Chandrasekhar, Minister of State for Electronics and Information Technology said in the third week of September. The first set of ‘necessary rules’ under the Act will also be issued within the same time frame. The DPB will be notified in the next 30 days and all the relevant rules will also be notified in the next 30 days. The time between 11 August when the Act was notified and when the DPB is constituted, should not be considered a safe harbour or immunity period for companies. If there’s a data breach during this time, the DPB will take it up once it is operational,” the minister clarified. Speaking at the consultation for timeframes needed by the industry to transition to the Act, the Minister said that there are likely to be three categories of data fiduciaries that will be given a graded timeline for transition for compliance to the provisions in the Act.

The first category comprising government entities at the Centre or State, panchayats or MSMEs that do not have the digital readiness for storing or processing data, are likely to get the most time for transition, followed by smaller private entities and start-ups. However, big tech or companies like Google, Meta, Apple and others that would already be complying with global data protection or privacy laws such as the GDPR, would be expected to comply at the earliest. The Act was enacted in August 2023 and reported by Asia Law Portal here.

Posted by Sourish Mohan Mitra

Sourish Mohan Mitra, India-qualified lawyer from Symbiosis Law School, Pune and currently working as an in-house counsel in Delhi, India; views expressed are personal; he can be reached at; Twitter: @sourish247

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