The results of the general elections led to the third term of the current government, though with some changes to India’s Parliament and its elected members. Hopefully, the momentum of economic growth will continue. The first indications of a slight fluctuation in the forecasts by a few global financial institutions over the last 2 months may perhaps stabilize over the next few weeks. One of the key focus areas of the government is implementing the data protection law in India and there are indications of the next steps being taken up on priority.
World Bank – The World Bank recently released its flagship report, Global Economic Prospects June 2024 edition. As per the report, growth in India is projected to be 6.6 percent in FY2022/23, a 0.3 percentage point downward revision from January (as reported by Asia Law Portal here). This slowdown is attributed to private consumption being constrained by high inflation and rising borrowing costs, while government consumption is impacted by fiscal consolidation. Growth is projected to pick up slightly to 6.4% for FY 2024/25 and 6.5% through FY2025/26, as inflation moves back toward the midpoint of the tolerance range and reforms payoff. The report mentioned that in India, growth in early 2023 remained below what it achieved in the decade before the pandemic as higher prices and rising borrowing costs weighed on private consumption. However, manufacturing rebounded into 2023 after contracting in the second half of 2022, and investment growth remained buoyant as the government ramped up capital expenditure. Private investment was also likely boosted by increasing corporate profits. Unemployment declined to 6.8 percent in the first quarter of 2023, the lowest since the onset of the COVID-19 pandemic, and labor force participation increased. India’s headline consumer price inflation has returned to within the central bank’s 2-6 percent tolerance band. Growth in India is expected to slow further to 6.3 percent in FY2023/24 (April-March). India will remain the fastest-growing economy (in terms of both aggregate and per capita GDP) of the largest Emerging market and developing economies (EMDEs).
Organisation for Economic Co-operation and Development (OECD) – The OECD recently released its OECD Economic Outlook Volume 2024 report titled ‘An unfolding recovery’. As per the report, for India GDP growth is projected at 7.8% in FY 2023-24 and around 6½ per cent in each of the following two fiscal years. Domestic demand will be driven by gross capital formation, particularly in the public sector, with private consumption growth remaining sluggish. Exports will continue to grow, especially of services such as information technology and consulting where India will continue to increase its global market share, supported by foreign investment. Headline inflation will decline gradually, although uncertainty about food inflation remains elevated. Monetary policy easing is projected to start in the second half of the year once lower inflation is maintained. The 2024 Interim Union Budget aims for consolidation, setting a fiscal deficit target at 5.1% of GDP for FY 2024-25. Fiscal support should remain targeted towards vulnerable households. Rising debt limits fiscal space and increases the need to tackle structural problems in order to make growth fairer and more sustainable. Returns from reforms could be significant in agriculture, which accounts for the largest share of employment and, due to low productivity and still widespread poverty, absorbs considerable public subsidies.
Fitch – Fitch Ratings has raised India’s growth forecast for FY25 to 7.2% from 7% earlier, on the back of elevated consumer confidence that is expected to drive spending and increased investments, but cautioned that the ongoing heatwave was a risk to both growth and inflation. In its Global Economic Outlook (GEO) released recently, it raised its forecast for world growth in 2024 to 2.6% from 2.4% estimated earlier. India’s economy grew 8.2% in FY24. “We expect the Indian economy to expand by a strong 7.2% in FY25 (an upward revision of 0.2pp from the March GEO, as reported by Asia Law Portal here),” Fitch Ratings said, adding that investment will continue to rise but more slowly than in recent quarters, while consumer spending will recover with elevated consumer confidence. Purchasing managers survey data point to continued growth at the start of the current financial year.
Data Protection Rules – The Ministry of Electronics and Information Technology (MeitY) will release the rules under the Digital Personal Data Protection (DPDP) Act, 2023 for consultation soon, Union IT minister Ashwini Vaishnaw said recently and added that the goal to bring in large-scale manufacturing of electronics, components, and semiconductor remains unchanged. The DPDP Act, the long-awaited data protection law, was given a presidential assent on August 12 last year (as reported by Asia Law Portal here), but it is yet to be implemented partly because the corresponding rules haven’t been notified. The minister noted that the entire implementation process will be digital by design. Under the DPDP law, a Data Protection Board will function as a “digital office” to deal with issues related to personal data breaches in a “digital by design” manner. Similarly, an appellate tribunal, to which complaints can be escalated if they are not satisfactorily resolved by the Board, will also be a “digital office”. The digital platform for the Data Protection Board is being built parallelly within MeitY, Vaishnaw said, adding it will be created by National Information Centre and/or Digital India Corporation.
