According to a poll by Reuters, India will be the fastest-growing economy in this year and in the coming year.
The growth is driven by a strong expansionary fiscal policy, according to the economist poll by Reuters. They also said that inflation will remain under control. India, being the world’s most populous nation, has exceeded expectations in Q1 and Q2 until the end of March in the current fiscal. The Indian government is stepping up infrastructure spending and unleashed growth before the coming Lok Sabha elections in May.
Though investment and employment have been showing a lag, India’s growth story is set to continue. The 54 economists have polled a 6.9% growth this fiscal up 6.7% as predicted in the December poll. However, forecasts indicate a 6.3% expansion next fiscal which is the same as the last poll.
Inflation which seems to grow at 5.69%, the quickest pace in four months in December will soon subside according to the poll. The survey showed an average CPI of 5.4% and 4.7% for this and next fiscal year. 23 of the 32 economists say that the chances of inflation returning are low in the coming six months. Consumer spending, constituting 60% of India’s economy, has stagnated. But 25 of 28 economists expect employment to improve in the coming six months.
Also, India’s business growth is set to expand at the fastest pace in 6 months. There has been a strong show by manufacturing in January as the PMI rose to 56.9 compared to 54.9 last month.
Demand is showing a strong expansion. New factory orders were the fastest in four months and the service sector new business is also showing good performance. The strong show in demand has boosted business expectations for the next 12 months. There has been a strong show by manufacturing as output was the highest in the last 9 years. Services sector hiring has especially improved and firms have been hiring for the 20th consecutive month.
Output prices grew slowly in January input costs accelerated since August 2023. There seems to be a pressure on prices.
The RBI is expected to keep interest rates on hold till July at least.
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