Investors and economists bullish on India's growth even as World Bank trims FY24 GDP outlook

• In its latest Global Economics Prospects report, the World Bank has cut India’s GDP growth forecast to 6.3% in FY24, from 6.6% earlier.
  
• Despite this, it expects India to remain the fastest-growing major economy in the world in 2023 as well as 2024.
  
• Overall, investors and economists are bullish on India’s growth prospects, with the Nifty50 index seen scaling new highs this month.
  

Even as investors and economists are sounding a bullish note on the growth prospects of the Indian economy and equity markets – especially after the ‘pleasant surprise’ of the Q4 GDP growth numbers – the World Bank has trimmed its outlook citing a slowdown in private consumption and elevated inflation levels.

In its latest Global Economics Prospects report, the World Bank has cut India’s gross domestic product (GDP) growth forecast to 6.3% in FY24, down from its previous forecast of 6.6% growth.

“This slowdown is attributed to private consumption being constrained by high inflation and rising borrowing costs, while government consumption is impacted by fiscal consolidation,” the World Bank report said.

After India’s economic growth for the March quarter came in at a better-than-expected 6.1%, global brokerages like JP Morgan, Goldman Sachs and Citi Research have upgraded their projections for India’s gross domestic product (GDP) growth in FY24.

India to still be the fastest-growing major economy

The World Bank also trimmed its global economic growth forecast to 2.4% from 2.7% earlier for 2024, stating that the global economy is in a “precarious situation”.

Despite the slight moderation in its India projections for FY24, the World Bank still expects India to be the fastest-growing major economy in the current financial year.

Here’s how India’s economy is expect to perform in 2024 as compared to other major economies:


Source: World Bank Global Economic Prospects, June 2023

Despite the World Bank trimming its growth forecast for India, it’s still higher than an average of 10 major brokerages, which stands at 6%.

Earlier this month, global brokerages upgraded their respective forecasts for the Indian economy’s growth in FY24 on the back of robust economic activity and a resilient investment environment.

Global brokerage JP Morgan said that there could even be an upside to its forecast if the government manages to execute its ₹10 lakh crore capex outlay for FY24.

“We are now factoring in a pickup in growth momentum in FY24. Continuing on the path of strong activity in FY23, we project real GDP growth for FY24 at 6.7% with Q1 at 7.8%, Q2 at 6.5%, Q3 at 6.3% and Q4 at 6.2%, amid broadly balanced risks,” said analysts at SBI Research.

Despite the upward revision in India’s FY24 GDP forecast by most brokerages, economists remain cautious about the adverse impact of a potential El Niño this year.

Investors bullish on Indian equity markets

Foreign investors accelerated their bets on Indian equities, with foreign portfolio investors (FPIs) pumping ₹43,839 crore in May.

On the other hand, foreign institutional investors’ (FIIs) buying hit a 27-month high during this period at ₹27,856 crore, the highest since February 2021.

Analysts say that the Nifty50 is headed for lifetime highs this month and recommend investors capitalise on dips.

“We expect broader markets to accelerate upward momentum fuelled by 18 month’s consolidation breakout in the Nifty Midcap index. Hence, dips should be capitalised on to build a portfolio from a medium-term perspective,” analysts at ICICI Direct said.

The Nifty50 index is up over 10% since the lows of March, and it is a little over 200 points away from its all-time high. Analysts say that the financial services sector is yet to contribute to the rally, and when it does kick in with gains, the markets will get the boost they need to cross their all-time highs this month.

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