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Is 6% growth possible? Nirmala Sitharaman has her work cut out

Finance Minister Nirmala Sitharaman has been giving the right type of bytes to the media prior to the Budget, talking about boosting capital expenditure, growth and creating the template for the “next 25 years”. But the Union Budget for FY24 is a unique one and Sitharaman has more to handle than just the routine.

It is the first normal budget after the Covid-19 pandemic and also the first in the midst of rising fears of a global recession as central banks have aggressively tightened monetary policy and increased interest rates to battle stubborn inflation and slow down growth.

The impact on economies across the globe can be seen from the fact that nearly half of the 15 fastest-growing economies in the world in 2022 were island countries. Growth almost became a scarcely used word for policymakers and central bankers last year.

Yet, India has emerged as an outlier among all major economies—an 8.7 percent Gross Domestic Product (GDP) growth for FY22, the fifth-highest forex reserves in the world at $562 billion as of December 23, 2022, trailing China, Japan, Switzerland and Russia, and one of the best performing stock markets of 2022—behind Indonesia and Singapore—with a 4.7 percent rise for the BSE Sensex index.

Various global investment banks and research firms, including Barclays, Bank of America and UBS Group, besides the International Monetary Fund (IMF) have warned of growth slowing further in 2023. Global growth is forecast to have grown by 3.2 percent in 2022 and 2.7 percent in 2023, according to an IMF projection. A war that shows little sign of lessening, further monetary policy tightening on the cards, and with the US and China battling their own set of problems, there are more question marks on growth than in 2022.

Still Led By Services

Will India realistically achieve at least 6 percent growth in FY24? Experts Forbes India spoke with say it is likely, but led by the services sector, which commands between 55 percent and 60 percent to India’s GDP, followed by manufacturing and then agriculture. The government wants the manufacturing sector to start doing the heavy lifting and corporates to start providing the necessary push to private capex growth. This is starting to happen as capacity utilisation rates are improving, but it is slow and uneven.


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