The current financial year should conclude as projected with a strong growth performance and macroeconomic stability as more than half of this fiscal has witnessed positive developments in the economy, a finance ministry report said on Tuesday. The Reserve Bank of India (RBI) has projected a 6.5 per cent GDP growth in the current financial year ending March 2024.
In the Monthly Economic Review for October, the ministry also said the downside risk will continue to be inflation that should keep both the government and the RBI on high alert.
Financial flows in the external sector need constant monitoring as they impact the value of rupee and the balance of payments, the report said, adding that a fuller transmission of the monetary policy may also temper domestic demand.
On the inflation front, it said the decline in international crude oil prices and continued moderation in core inflation are likely to control inflationary pressures going forward.
Recognising this trend, the report said the RBI has also indicated that any further tightening of monetary policy will likely occur when transmission is closer to completion and if the situation warrants.
The government’s sustained investment push, healthy corporate profits and a reduction in banks’ non-performing loans will likely keep investment buoyant despite elevated input costs, it noted.
India’s exports are also expected to perform well, driven by strong performance in services exports, the report added.
On balance, however, the report said India’s growth experience in FY24 should continue to be a positive outlier as compared to other major economies.
“In the medium-term, thanks to the sustained focus on public investment in infrastructure and advances in digital public infrastructure, India can look ahead to the prospect of a longer economic and financial cycle than in the past, subject to global factors,” it said.
On the public finance side, the report said the central government is on track to achieve the budgeted deficit target for the current fiscal year as well.
Continued buoyancy in revenue collections supported by prudent expenditure management has enabled the fiscal deficit to be contained within 40 per cent of the Budget Estimate during the first half of the year, it said.
According to the report, the government’s emphasis on capital expenditure has continued during the year as well imparting an impetus to private investment.
The recent steep and rapid decline in global crude oil prices removes an important source of potential impact on public finances as well, it added
