Global and Indian Economic Outlook: Positive Trends in 2024

The global economic outlook for 2024 appears optimistic, with the International Monetary Fund (IMF) projecting steady growth across various economies. This positive sentiment is mirrored in India, where several key economic indicators have shown significant improvement, leading to an upgraded outlook on the country's sovereign rating by S&P.

Upgraded Sovereign Rating and Fiscal Improvements

S&P has upgraded its outlook on India's sovereign rating to positive, reflecting the country's robust economic performance. One of the standout achievements is the reduction in India's current account deficit (CAD) for FY 24, which has dropped to 0.7% of GDP from 2% in FY 23. Notably, the fourth quarter of FY 24 witnessed a record surplus of 0.6%, indicating stronger external balances.

Decline in External Debt and NPAs

India's external debt ratio has also seen a remarkable decline, falling to a 13-year low of 18.7% in FY 24. This reduction enhances the country's financial stability and reduces vulnerability to external shocks. Additionally, the banking sector has made significant strides in asset quality, with the gross non-performing assets (NPA) ratio at a multi-year low of 2.8% and the net NPA ratio down to 0.6% in FY 24. These improvements reflect better credit management and stronger financial health of banks.

Inflation and GDP Growth

Another positive development is the reduction in retail inflation, which touched a 12-month low of 4.75% in May 2024. This decline in inflation is crucial for maintaining the purchasing power of consumers and supporting economic stability. On the growth front, India's GDP for FY 24 stood at an impressive 8.2%, surpassing the optimistic estimates made by both the government and private agencies. This robust growth highlights the resilience and dynamism of the Indian economy.

Fiscal Space and Future Prospects

The government's fiscal position has been further strengthened by a bumper dividend of Rs. 210,874 crore, providing additional fiscal room to support development and welfare initiatives. This financial flexibility is expected to facilitate sustained economic growth and social development in the coming years.

In summary, the global and Indian economic outlook for 2024 is marked by positive trends. With steady global growth projected by the IMF and significant improvements in India's fiscal metrics, debt ratios, and banking sector health, the country is well-positioned for continued economic progress.