India foreign reserves climb to $623.2bn, GDP rate predicted at 7.3pc in 2023-24
Business
Economic growth figures are the highest for any major economy, can boost Modi in elections
MUMBAI/NEW DELHI (Reuters) – India's foreign exchange reserves rose for a seventh straight week and stood at a near 22-month high of $623.20 billion as of Dec. 29, data from the central bank showed on Friday.
The reserves rose by $2.76 billion for the reported week after increasing by a total of $30.12 billion in the prior six weeks.
Changes in foreign currency assets are caused by the Reserve Bank of India's (RBI) intervention as well as the appreciation or depreciation of foreign assets held in the reserves.
The RBI intervenes in the foreign exchange market to curb excess volatility in the rupee.
The rupee is expected to trade in a tight range against the US dollar this year as the RBI continues to intervene to manage the exchange rate despite aggressive market bets for US interest rate cuts, according to a Reuters poll of FX strategists.
Foreign exchange reserves also include India's reserve tranche position in the International Monetary Fund.
For the reported week, the rupee traded in a narrow range of 83.0950 to 83.3500 against the dollar, and logged marginal weekly losses.
The domestic currency settled at 83.15 on Friday, little changed for this week.
GDP GROWTH ESTIMATED AT 7.3PC
India forecast annual growth of 7.3 per cent in the fiscal year ending in March, the highest rate of any of the major global economies, providing a boost for Prime Minister Narendra Modi ahead of the national elections scheduled to be held before May.
"These are early projections for 2023/24," the National Statistical Office (NSO) said in a statement on Friday, adding improved data coverage, actual tax receipts and spending on state subsidies could affect subsequent revisions.
The first advance estimates of annual gross domestic product follow last month's increased forecast to 7pc from the Reserve Bank of India (RBI), up from an earlier estimate of 6.5pc.
Analysts said growth exceeding 7pc for a third year in a row in the context of a global slowdown would help Modi to win a third term to rule Asia's third-largest economy.
"This growth comes at a time when global conditions remain weak and its credit goes to how the government is managing the economy," Rahul Bajoria, economist at Barclays Investment Bank, said.
S&P Global Ratings expects India will remain the fastest-growing major economy for the next three years, putting it on track to become the world's third-largest economy by 2030, overtaking Japan and Germany.
India's economy grew 7.2pc in 2022/23 and 8.7pc in 2021/22.
Finance Minister Nirmala Sitharaman will present an interim annual budget on Feb 1 and is expected to increase infrastructure spending, helped by rising tax receipts, while aiming to lower the fiscal deficit from 5.9pc of GDP in the current fiscal year.
Government spending is estimated to rise by about 4pc year-on-year in 2023/24 compared to a 0.1pc increase in the previous fiscal year, while private investment would rise by 10.3pc, lower than an 11.4pc rise in the previous year, data showed.
Private consumption, which accounts for nearly 58pc of GDP, was seen expanding by 4.4pc year-on-year compared to 7.5pc in the previous fiscal year.
EXPANDING MANUFACTURING
Modi has taken steps to attract global companies including Apple and Japanese companies, to set up factories in India, while increasing spending to build roads, ports and airports.
Manufacturing, which accounts for about 17pc of GDP, is estimated to expand 6.5pc year-on-year in 2023/24, compared to 1.3pc a year ago, while construction output was seen growing by 10.7pc, up from 10pc in the previous year, data showed.
India posted faster-than-expected economic growth of 7.6pc year-on-year in the September quarter, after growing 7.8pc in the previous quarter, which prompted many private economists to upwardly revise their yearly estimates.
Many economists feel that India's growth was fuelled by sectors, including information technology and financial services that only create limited jobs and do not help the poor in rural areas.
Growth in farm output, which contributes about 15pc of GDP and employs more than 40pc of workforce, was seen slowing to 1.8pc in the current fiscal year, from 4pc a year ago.
Average per capita income in the South Asian nation with a population of over 1.4 billion, remains around $2,500, less than a quarter of China's.
