India’s GDP set to grow 8pc or more in Jan-March quarter, finance minister says

NEW DELHI: India's gross domestic product (GDP) is on track to grow by 8 percent or more in the quarter ending March 31, Finance Minister Nirmala Sitharaman said on Saturday.

The economy is expected to show the same rate of year-on-year expansion for the 2023/24 financial year, Sitharaman added, citing the impact of improved inflation management and macroeconomic stability.

"Hopefully the fourth quarter ... will also have (growth) of 8 percent or above 8 percent resulting in 2023/24 having an average growth in GDP of 8 percent or over 8 percent," Sitharaman said during an event in the financial hub of Mumbai.

“Three quarters of consistent growth over 8 percent 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."

India's GDP data for the Jan-March quarter is due to be released on May 31.

Asia's third-largest economy grew 8.4 percent in the October-December quarter year-on-year, outpacing the 7.6 percent growth recorded for the previous quarter.

Following the 8.4 percent 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 percent, a 10 basis points improvement from its previous forecast.

India's economy is projected to grow at 7.6 percent in the current fiscal year to March 31, according to the latest government estimates.

Addressing inflation, the 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.

“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 percent in February and has stayed within RBI’s flexible inflation target of 2-6 percent for the sixth consecutive month. The RBI has, however, reiterated the inflation target is 4 percent and the central bank would look for durable signs of deceleration in inflation.

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."

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 Indian 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." —News Desk