JPMorgan raised its 2024 economic forecast for India – but only barely – saying that the country’s economic growth will likely be affected by a slowdown in the worldwide growth rate.
The investment bank raised its growth forecast for 2024 from 5% to five.5%. The revision follows this week’s latest gross domestic product data, which showed the Indian economy accelerated by 6.1% from January to March, up from 4.5% within the previous quarter.
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The economy began the 12 months “on a really strong note as growth has been much faster or much higher than market consensus,” said DBS Bank senior economist Radhika Rao.
Strong growth within the South Asian country was driven by rising domestic demand for goods and services in addition to strong exports.
“We note the continued strength of India’s services exports and that goods exports have cyclically performed higher than expected,” JPMorgan wrote in a memo.
There have been also “several pockets of surprises up, including manufacturing, construction and agricultural production… fixed asset investment growth also fared higher,” Rao told CNBC’s “Street Signs Asia” on Thursday.
Economies that rely heavily on trade are losing momentum, she said, but those like India which have focused on “organic drivers” of growth are doing higher.
Nonetheless, JPMorgan stays cautious concerning the country’s growth prospects next 12 months.
While the federal government has announced a rise in investment spending, it is going to take a while before this translates right into a broader cycle of personal investment.
Investments from India “haven’t modified much” over the past few years, he said Jahangir AzizHead of Emerging Markets Economics at JPMorgan.
“Over the past six months, we have seen a noticeable drop in FDI globally,” Aziz said, adding that FDI in each China and India fell.
“Private investment in India has mainly come to a halt… And public spending from government investment has fallen by 7% over the past 10 years,” he stressed.
The investment bank also expects India’s exports to fall as global growth slows and more advanced economies head into recession.
“Global growth is predicted to proceed to decelerate in the approaching quarters, and domestically, the impact of monetary policy normalization is predicted to be felt with a lag,” JPMorgan said.