Declining growth in urban incomes, diminishing corporate earnings, a slowdown in early-stage government capital expenditure, restrictive monetary policies, and a gloomy global growth forecast could suppress overall production, as indicated in the study.
Although local economic activities seem resilient, the recovery in broader economic activity remains uneven. While the growth of rural incomes has been lukewarm, urban employment has seen only a marginal uptick. The pace of growth in urban salaries is projected to decelerate in the future. Combined with the delayed impact of a more stringent monetary policy, this is expected to further dampen domestic consumption, the analysis highlighted.
Conversely, capital expenditure indicators appear robust, with noticeable improvements in capacity utilization and emerging signs of new project initiations. Nevertheless, the domestic economy is bracing for several hurdles, including heightened global unpredictability, stricter international financial environments, an anticipated dip in corporate profitability, and persistently high inflation.
The recorded economic growth rate of 7.8% for Q1FY24 aligned with market anticipations. Private consumption emerged as the primary growth stimulant, even as government expenditure witnessed a slight decline by 0.7%. The manufacturing sector’s growth remained stagnant, and agriculture’s contribution dwindled. External challenges, like international uncertainties and unpredictable weather patterns, complicate the task of accurately projecting growth for the entirety of FY24. However, a diminishing growth trajectory is anticipated, as outlined by JM Financial Institutional Securities in their report.