Global environment gloomier, India to grow at 6% next year: CRISIL

The global environment has become “gloomier” due to high inflation, rate hikes, and geopolitical events. India is expected to grow at 6 per cent in 2023-24, rating agency CRISIL said on Thursday.

In its report titled, “Rider in the storm: Tracing India’s growth in a volatile world”, CRISIL said that the risks to inflation are “tilted upward” due to the predictions of El Nino over the next couple of months.

The picture, however, is better in the medium term. Consumer inflation in India is expected to moderate to 5 per cent on average in FY24 from 6.8 per cent in FY23, owing to the high-base effect and some softening of crude and commodity prices.

“India’s medium-term growth prospects are healthier. Over the next five fiscals, we expect GDP to grow at 6.8% annually, driven by capital and productivity increases,” said Amish Mehta, managing director and chief executive officer (CEO) at CRISIL.

The report added a good rabi harvest would help cool food inflation, while the slowing economy should moderate core inflation. The report added that higher capital investments by the government and the private sector should drive medium-term growth.

“Overall industrial capex is seen rising to nearly Rs 5.7 trillion on average between 2023 and 2027, compared with Rs 3.7 trillion in the past five fiscals. Nearly half of this incremental capex is being driven by the Production-Linked Incentive (PLI) scheme and new-age sectors,” said Suresh Krishnamurthy, senior director at the agency.

According to Dharmakirti Joshi, chief economist at CRISIL, the current account deficit (CAD) is expected to narrow to 2.4 per cent of the gross domestic product (GDP) from the estimate of 3 per cent in the current year. This will reduce the country’s external vulnerability.

“India’s external vulnerability is expected to decline with a narrower and modest short-term external debt,” Joshi said.