India's growth prospects in FY 2023-24

 

Growth projections for India for FY 24 show wide divergence.

•  The RBI Governor recently threw his weight behind the RBI forecast of 6.5 per cent
• The Chief Economic Advisor estimates growth at 6-6.8 per cent with downside risks being greater, meaning growth will be closer to 6 than to 6.8 per cent
•  The IMF has scaled down its growth forecast for India to 5.9 per cent
• Dr C Rangarajan, former Chairman, PM’s Economic Advisory Council, thinks we will end up with 6 per cent
• Many private sector forecasters see growth below 6 per cent, some peg it close to 5 per cent  

What do we make of these forecasts? I guess much depends on whether or not the downside risks materialise. A big one is an escalation in the conflict in Ukraine. Another is further bouts of banking instability in the US and elsewhere. The IMF mentions several other downside risks: higher than expected real interests at a time when debt levels are high; stickier inflation; sovereign debt distress in emerging and developing economies (already seen in Sri Lanka and Pakistan); faltering growth in China; greater retreat from global integration.

The IMF estimates that the probability of global growth going below 2 per cent in 2023 is 25 per cent- this has happened only five times since 1970. (The IMF’s baseline forecast is for 2.8 per cent). That will happen if many of the downside risks materialise. 

My guess is that we will be lucky if India’s growth rate exceeds 6 per cent in FY 24.