Indian economy to see stronger than expected growth in 2023-24: RBI article

Mumbai: The Indian economy is projected to record stronger-than-expected growth in 2023-24, and the government's thrust on capex has started to crowd-in private investment, said an article published in the latest RBI Bulletin.

The world economy faces divergent near-term growth prospects and emerging market economies led by Asia are poised to outperform the rest of the world, said the article on 'State of the Economy'.

"The Indian economy recorded stronger-than-expected growth in 2023-24, underpinned by a shift from consumption to investment," it said.

The government's thrust on capex is starting to crowd-in private investment, said the article authored by a team lead by Reserve Bank Deputy Governor Michael Debabrata Patra.

In India, the authors said potential output is picking up with actual output running above it, although the gap is moderate.

"In 2024-25, the objective should be to sustain this momentum by securing real GDP growth of at least 7 per cent in an environment of macroeconomic stability," they said.

Accordingly, inflation needs to align with the target by the second quarter of the year, as projected, and get anchored there.

Also, balance sheets of financial institutions need to be strengthened and asset quality improved even further, the article said, and added the ongoing consolidation of fiscal and external balances needs to continue.

"The gains of the transformative technological change that is underway must be harnessed for inclusive and participative growth in a sound risk-free environment.

"Above all, the virtuous thrust to investment from government capex must be partnered and even led by the corporate sector, supplemented by foreign direct investment," it said.

The article also stressed that the weak global outlook can be brightened if geopolitical conflicts end and their repercussions through commodity and financial markets, trade and transportation, and supply networks are contained.

"Inflation must be vanquished, paving the way for financial conditions to ease in support of growth," it added.

The RBI, however, said the views expressed in the Bulletin article are of the authors and do not represent the views of the central bank.