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Wednesday, May 29, 2024

Variegated patterns of growth bringing forth unprecedented challenges: Ghosh

Date:

 The variegated patterns of growth emerging across the globe is bringing forth unprecedented challenges before policy makers, regulators and economists in assessing the real rates of projected growth, not only during the current year i.e. 2023 but continuing through 2024 and 2025 as the inflation trajectory management for central banks has been elongated after the surprising turn of events last year, according to Dr Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.

“Clearly, many central banks will have to sit and watch the paint dry while bracing themselves for enhanced pass-through of geo-political and climate related shocks, apart from the usual suspects like burden of debt servicing in rising interest rate regime, money and currency market upheavals, accelerated spending required on energy and mobility transition and anchoring a threshold along quality job availability fitting the skill sets of a younger, experience centric population,” Ghosh said.

Amidst this global hullabaloo, India is expected to continue its showdown in pursuing a different pathway of zeroing in on drivers of growth, looking for a renewed surge in resilient manufacturing while supporting services sector to embrace enhanced efficiency.

Locally, domestic consumption and investment stand to benefit from stronger prospects for agricultural and allied activities, strengthening business and consumer confidence, and strong credit growth while supply responses and cost conditions are poised to improve as inflationary pressure is easing.

The Union Budget 2023-24’s emphasis on capital expenditure is expected to crowd-in private investment, strengthen job creation and demand, and raise our growth potential. RBI has estimated Q4FY23 Real GDP growth to be 5.1% and full year FY23 estimates by NSO is 7.0%.

For 2023-24, RBI is projecting GDP growth at 6.5% with Q1 is pegged at 7.6%. SBI’s ANN (Artificial Neural Network) model, based on 30 high frequency indicators from key sectors, and tuned/trained to project the GDP numbers forecasts the quarterly GDP growth for the Q4FY23 at 5.5%. At this rate, India’s GDP growth for FY23 is likely at 7.1% .

World Economic Outlook (WEO) report from IMF in April 2023 revised the baseline growth forecast from 3.4% in 2022 to 2.8% in 2023, before settling at 3.0% in 2024.

AEs are expected to see an especially pronounced growth slowdown, from 2.7% in 2022 to 1.3% in 2023.

Surprisingly, China’s GDP is expected to witness a rebound, growing at 5.2% in 2023 and 4.5% in 2024, compared to 3.0% in 2022. Given the intensity/level of distrust towards the mainland from the global community, could China use its pricing prowess in bulk manufacturing as a hook to lure the corporates, playing along their quest for maintaining stronger bottom lines on a quarterly basis? Such a recourse, if it gains winds, would sure be a checkmate to the genuine efforts made in last 2-3 years to isolate the country, highlighting its vile intentions, Ghosh said.

Global headline inflation in the baseline case is set to fall from 8.7% in 2022 to 7.0% in 2023 on the back of lower commodity prices though underlying (core) inflation is likely to decline more slowly.

Meanwhile, India Inc. continues to front lead the economic turnaround while embracing better operational and financial efficiency. In Q4FY23, around 1700 listed entities reported top line growth of 12, while PAT grew by around 19% as compared to the same period previous year. Same set of companies reported EBIDTA growth of around 23% in Q4FY23, Ghosh added.

Corporate results, ex BFSI, for Q4FY23 shows both top line and bottom-line growth of around 10%, while EBIDTA grew by 7% as compared to Q4FY22. Further, it is pertinent to mention that corporate margin, which was continuously under pressure for last few quarters, shown sign of improvement in Q4FY23. As reflected in results of around 1500 listed entities ex BFSI, EBIDTA margin, on aggregate basis, improved from 13.96% in Q4FY22 to 14.34% in Q4FY23.

Green shoots are also emerging on foreign capital inflows in capital markets with YTD FIIs inflows in FY24 touching $6Bn, a reversal of trend from 2022. Start-ups financing has been hit due to banking turmoil in the US, in particular failure of niche banks though it also offers a gearing up pedestal to domestic FIs to ring fence the financial needs of these changelings internally to ensure the sweet spot enjoyed by India grows in a disruptive and disproportionate manner.

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