Economic optimism on the horizon for 2024, predicts economists

As the new year dawns, economists are painting a promising picture for the global economy in 2024. Amidst the tumultuous backdrop of recent years, characterized by unprecedented challenges, financial volatility, and pandemic-induced disruptions, experts are foreseeing a shift towards brighter prospects. A boost to government spending and consumption in the wake of national polls, geopolitical uncertainties coming off from the peaks seen this year and a strong likelihood of 7% average expansion of the economy are likely to be the defining features of the new calendar year starting 1 January, according to economists. According to D.K. Srivastava, chief policy adviser at EY, the Indian economy is expected to see a 7% expansion in the January to December period of 2024. If one looks at FY25, the growth is expected to be in the range of at least 6.5-7.0%, said Srivastava. “On the whole, there would be positive vibes in the economy," said Srivastava.
One key development reportedly expected next year that would define Centre-state fiscal relations over the five years from 2026 would be the commencement of the Sixteenth Finance Commission’s consultations. The Commission will hold extensive discussions across the country to decide on the share of states in Centre’s divisible pool of tax revenue and how to apportion it among states. The commission is expected to start deliberations soon after the elections.
Further,in October, the International Monetary Fund (IMF) had revised India’s economic growth forecast for the current fiscal year to 6.3% from its earlier forecast of 6.1%, citing strong domestic consumption, while cutting its growth forecasts for China and the euro region. Following the cue, other agencies like Morgan Stanley, Citi and Goldman Sachs, too, raised GDP growth forecasts for India for FY24. While Morgan Stanley revised India’s GDP growth forecast target by 50 basis points to 6.9% for FY24, Goldman Sachs revised the calendar year growth forecast by 20 basis points to 6.7%. Citi said the economy could grow 50 basis points higher than its earlier forecast to 6.7% on-year in FY24.Retail inflation measured by consumer price index (CPI) saw a sharp spike this year. After sprinting to a 15-month high of 7.4% in July, led by an increase in food prices, it fell to a four-month low of 4.87% in October and surged to 5.5% in November, according to estimates.
The year 2023 saw the Indian economy remaining a bright spot as the fastest growing major economy in the world while the global economy showed volatility and signs of slowdown though unevenly across geographies. Developed economies also faced high inflation and high-interest rates.While acknowledging these challenges, economists remain cautiously optimistic, pointing to the collective resilience and adaptive capacity demonstrated by societies and businesses globally. The lessons learned from navigating unprecedented challenges have equipped economies with newfound resilience and adaptability, positioning them for a more robust recovery in the coming year.As 2024 unfolds, economists are cautiously optimistic that the groundwork laid by technological innovation, fiscal policies, and global cooperation will pave the way for a more buoyant economic landscape, fostering growth and prosperity on a global scale.

(Ira Singh, Asstt Editor, Gandhinagar)