The Bombay Stock Exchange in Mumbai

The Indian Economic Outlook for 2024: Opportunities and Challenges

The Turkish Center for Asia Pacific Studies -  February 16, 2024

Professor Badar Alam Iqbal
APAC Non-resident Distinguished Fellow,  e-mail: 

The year 2023 has passed out and India has entered in new year of 2024. However Indian economy has been facing many formidable tasks and challenges having far-reaching implications and effects on the performance of the Indian economy in general and the masses in particular. As due to a new year starts does not mean that new trends will emerge in 2024. Some of the indicators may be carried forward from 2023 which has already been witnessed during the last year. It is firmly believed that indicators don’t take into account the calendar years. India's challenges are not solely determined by domestic factors but are also influenced by global developments. Rising geopolitical events, therefore, could be a threat to the Indian economy.

The Finance Ministry has highlighted four challenges facing the Indian economy: Artificial Intelligence (AI)'s threat to the services sector, the trade-off between energy security and economic growth, the impact of global developments, and the availability of a skilled workforce. The Interim Budget announcement is separate from the Economic Survey, which will be released before the full budget after the general elections. The Indian Government has sorted out four challenges confronting the Indian economy, including AI's threat to the services sector, the trade-off between energy security and economic growth, and the availability of a skilled workforce to meet the demands of the Indian economy. The growth outlook also depends on the spillover effects of global developments and not just its domestic performance. "Increased geoeconomic fragmentation and the slowdown of hyper-globalization are likely to result in further friend shoring and onshoring, which are already having repercussions on global trade and, subsequently, on global growth. There are many predictions for the Indian economy for the year 2024.

The BJP-led Government has shown overconfidence in the persisting trends of the Indian economy. The interim budget which was presented in February 2024 witnessed a shift to fiscal consolidation which is sine-quo-none for smooth performance of the economy. The Indian Finance Minister Nirmala Sitharaman pointed out that the fiscal deficit which stood at 9.2 percent during 2020-21 due to the persisting pandemic-induced recession, will be brought to a level of 5.8 percent in 2023-24; further decline to 5.1 percent during 2024-25 and further to a level of 4.5 percent of the country’s total GDP in 2025-26.

The present interim budget indicated a noticeable reduction in the public expenditures; slashing effective capital expenditures by 1 lakh crore with the reduction in welfare and subsidy allocations. Added to these, the current prospects of a slowdown in the country’s economic operations are imminent. I wonder how the Indian Government will handle such a situation in 2024-25. According to the available data; there is a decrease in nominal GDP at a figure of 9 percent in 2024-25 over the figure of 16 percent during 2023-24. It is a matter of concern that the IMF raised the question of the accuracy of data and information relating to the country’s growth projections.

Similarly; real GDP growth [at constant prices] has been projected at a figure of 7.3 percent [advanced projections], which is slightly higher than the last year's figure of 7.2 percent. The noteworthy issue is country’s fiscal scene is becoming complex because of an increase in the existing level of debt and as a result, the Indian Government formally withdrew the post-COVID-19 stimulus package during the interim budget.

Recently, the IMF India Report observed and pointed out many limitations and deficiencies to real sectoral data, especially in the context of national accounts; employment, and prices putting a sign of integration on the credibility of the data and information. Accordingly, the IMF has asked the Indian Government to look into these critical issues. These issues could be resolved through the upgradation and expansion of official data and information.

On the other side, the IMF projected a GDP growth rate of 6.7 percent for the last year [2023-24] and 6.5 for current year [2024-25]. These figures indicate the trend of deceleration of economic operations in the country.

Another emerging issue is related to the inflation situation in the country. There is a contradiction regarding this issue. The present value of the GDP deflator should match with the retail inflation rate which has come down by less than 2 per cent during 2023-24. However official data available indicates that the monthly average of consumer price inflation is at 5.5 percent during 2023-24.

Interim Budget and Fiscal Finance

The most significant thing is that the Indian government has tried to divert the attention of the concerned concerning the so-called change in economic operations. In support of this, the Indian Government brought out a ‘While Paper” covering a considerable period of twenty years. The white paper is a sort of effort to paint a rosy picture concerning the National Democratic Alliance (NDA) and the gloomy scene of the United Progressive Alliance (UPA). But the truth is otherwise. It is generally believed that for the last twenty years, there has not been much clarity in respect of the fiscal scene. It is important to mention that during the NDA-I period, the government has reduced expenditure in terms of GDP concerning the major head of government expenditure. Whereas the UPA Government had not reduced spending on major head of expenditures. Similar trends emerged during NDA-II.

Inflation and Growth

Inflation and growth are other two controversial issues that are highly debatable and controversial. It is indicated by different groups of people who are directly and indirectly related to issues. They opined that officially available data on the performance of the real economy observed that there has been strong criticism and they believed that the Government [NDA] has over-projected its macroeconomic indicators and underestimated the same for UPA.

Major Challenges for 2024

The following are the formidable tasks for the NDA Government to face and then resolve during 20024.

How to preserve and restore democratic values; rights and duties?

How to improve the quality of politicians who are the core of the country’s system?

How to control the persisting and rising rate of inflation affecting the common people to a greater extent?

How to manage the rising trend of migration of Indian people across the world?

How to deal with the rising trends in income disparities and unemployment?



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