Indian economy closes FY24 strongly despite external headwinds: Ministry of Finance

Despite strong external headwinds, the monthly economic review of the Department of Economic Affairs under the Ministry of Finance has said that the Indian economy closed the just-concluded financial year 2023-24 (FY24) strongly with its growth surpassing market expectations. The review report said early indications suggest a continuation of the economic momentum during the first quarter of 2024-25 (April-June). It said ‘The emerging robust trends in important high-frequency indicators of growth like the GST collections, e-way bills, electronic toll collections, sale of vehicles, purchasing managers' indices and the value and number of digital transactions attest to the growing strength of the economy’. 

Citing performance in Index of Industrial Production and Purchasing Managers' Index (PMI) for manufacturing, it asserted that Industrial activity is gaining momentum. Concurrently, fixed investment is gathering pace on the back of the focus of the government on capital spending and the resultant crowing in of private investment. The report said ‘The forward-looking surveys of the Reserve Bank also indicate improving consumer confidence and industrial outlook’. Along with growth, it asserted that the other macroeconomic indicators are also improving. Retail inflation clocked 4.83 per cent in April 2024, the lowest in the past 11 months.

On the external front, it said despite global challenges, India's foreign exchange reserves are comfortable, and the Indian rupee has been one of the most resilient vis-a-vis the US dollar in recent months. From the fiscal angle, it noted robust trends in the capital spending of the general government during April-February of 2023-24, combined with the fiscal consolidation plans reflected in the Budget for 2024-25, have laid to rest concerns about debt sustainability. Thus, the major pillars of India's macro-economic strength, including growth, price stability and fiscal management, are directionally positive. The geopolitical tensions and volatility in global commodity prices, especially of petroleum products, present substantial multi-frontal challenges.

In context to India, the report that the expectation is that the macro-economic buffers nurtured and strengthened during the post-Covid management of the economy will help the Indian economy navigate these challenges reasonably smoothly. India's GDP grew at a massive 8.4 per cent during the October-December quarter of the financial year 2023-24, and the country continued to remain the fastest-growing major economy and is poised to maintain its growth trajectory going ahead. The size of India's GDP is currently ranked 5th, after the US, China, Germany, and Japan. It overtook the UK in 2022. Just a decade ago, Indian GDP was the eleventh largest in the world. Currently, India's GDP is estimated to be around $3.7 trillion.