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JPMorgan recently revised its economic forecast for India in 2024, considering the country’s growth prospects in the context of a global slowdown. The investment bank has increased its growth projection from 5% to 5.5%. This adjustment follows the release of the latest gross domestic product (GDP) data, which indicates that the Indian economy expanded by 6.1% in the January to March quarter, showing improvement compared to the previous quarter’s 4.5% growth.
Radhika Rao, a senior economist at DBS Bank, noted that the year started on a highly positive note for the Indian economy, with growth surpassing market expectations. This robust expansion was primarily driven by increased domestic demand for goods and services, as well as strong export performance. JPMorgan specifically highlighted the ongoing strength of India’s service exports and mentioned that goods exports were also surpassing expectations.
Rao further highlighted several areas of positive surprises, including manufacturing, construction, and agricultural output. Additionally, the growth in fixed capital investment has outperformed initial projections. While trade-dependent economies are grappling with a slowdown, India, with its focus on organic growth drivers, is comparatively faring well.
However, JPMorgan maintains a cautious stance on India’s growth prospects in the following year. Despite the government’s announcement of increased capital expenditure (capex) spending, it will take time for this to translate into a broader upswing in private investment. Jahangir Aziz, the chief of emerging market economics at JPMorgan, pointed out that investments from India have remained relatively stagnant over the past few years. He also highlighted a noticeable decline in global foreign direct investments (FDI), including in both China and India, in the last six months.
Aziz emphasized that private investments within India have essentially remained stagnant, while government investments have shown a consistent 7% growth over the past decade. Additionally, the investment bank anticipates a decline in Indian exports as global economic growth slows down, with advanced economies inching closer to a recession. JPMorgan also expects that the impact of monetary policy normalization will be felt domestically, although with a time lag.
In conclusion, JPMorgan has revised India’s economic forecast upward for 2024, considering the country’s growth prospects amidst a global slowdown. The recent GDP data and strong performance in sectors like manufacturing and services have contributed to this revision. However, JPMorgan maintains a cautious stance for the following year due to stagnant private investments, a decline in foreign direct investments, and the potential impact of global economic conditions on India’s exports.
