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Business News/ Economy / India GDP expected to grow 8% and above in March quarter and FY24, says FM Sitharaman

India GDP expected to grow 8% and above in March quarter and FY24, says FM Sitharaman

The government is working closely with the RBI to keep inflation, especially food inflation, within acceptable limits, the finance minister said

FM Nirmala Sitharaman delivering her keynote address at the Mint India Investment Summit 2024 in Mumbai.Premium
FM Nirmala Sitharaman delivering her keynote address at the Mint India Investment Summit 2024 in Mumbai.

MUMBAI:The Indian economy is expected to grow at 8% or above in the last quarter of the current financial year, leading to an equivalent growth for the whole of fiscal year 2024 (FY24), finance minister Nirmala Sitharaman said on Saturday.

“Hopefully the fourth quarter (of FY24) which ends tomorrow will also have it in the range 8% or above 8%, resulting in 2023-24 having an average GDP growth of 8% or over 8% is what my expectation is," Sitharaman said in her keynote address at the Mint India Investment Summit 2024 here.

India's economy expanded at 7.8% in Q1, 7.6% in Q2 and 8.4% in Q3 of FY24. “Three quarters of consistent growth over 8% is really good news and I thank the people of India for being so energetic, and coming out to make sure that India remains the fastest growing economy," she said.

Following the 8.4% growth in Q3, which surpassed expectations, various institutions have upgraded their GDP growth forecasts for India. The most recent upgrade came from Goldman Sachs, which has raised its 2024 economic growth projection for India to 6.6%, a 10 basis points improvement from its previous forecast.

Addressing inflation, the finance minister said that the government is “playing in tandem with the Reserve Bank of India" (RBI) to ensure that inflation is well within the tolerance band and that food inflation in particular is contained.

Sitharaman acknowledged that seasonal food shortages can cause inflation spikes but reassured that the situation is under control, thanks to a dedicated group of ministers overseeing the matter.

“So India’s picture, if you want to look at it that way at a macro level, macroeconomic stability is in place, inflation management is far better than the last 10 years before 2014 where it went to double digit," she said.

Retail inflation as measured by the consumer price index (CPI) stood at 5.09% in February and has stayed within RBI’s flexible inflation target of 2-6% for the sixth consecutive month. The RBI has, however, reiterated the inflation target is 4% and the central bank would look for durable signs of deceleration in inflation.

Meanwhile, Sitharaman said that the banking sector’s health has also improved, entities which are now giving rich dividends to the government.

“Their NPAs (non-performing assets) levels are coming down and they are only going to further come down in the next few months," she said.

The finance minister said that the formation of the National Bank for Financing Infrastructure and Development (NaBFID) has allowed banks to finance shorter duration assets and avoid asset-liability mismatches. 

The government set up NaBFID as lenders were not too keen on taking large exposures to infrastructure projects after burning their fingers in the last round of financing. Last year, RBI said that NaBFID has been set up as a DFI to support the development of long-term infrastructure financing in India and the regulator would supervise it as an All India Financial Institution (AIFI). It is the fifth AIFI after Exim Bank, Nabard, National Housing Bank (NHB) and Sidbi.

The banking sector, Sitharaman said, is revving to perform and particularly the scheduled commercial banks after going back to doing their core business of lending and receiving deposits, and not getting into long-term high-risk investments for which the government has set up NaBFID.

“The NaBFID was the bank which India waited for a very long time and because they have come into play, the banks can get back to making sure that short and medium credits are the ones they are focusing on rather than looking at high long term credit lending," she said.

Sitharaman also said that state-owned banks are now being nudged to be a lot more professional in handling their affairs.

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Shayan Ghosh
Shayan Ghosh is a national editor at Mint reporting on traditional banks and shadow banks. He has over 12 years of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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Published: 30 Mar 2024, 07:47 PM IST
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