India's economy is estimated to be 6% in fiscal 2024 as compared to the government's projections of 7% for the fiscal year 2023, says the latest report by ratings and analytics company CRISIL. It cites a complex interplay of geopolitical events, stubbornly high inflation — and sharp rate hikes to counter that — for gloomy growth forecast globally.

Domestically, the peak impact of the rate hikes — 250 basis points since May 2022, which has pushed interest rates above pre-Covid-19 levels — will play out in fiscal 2024, it adds.

According to the ratings agency, consumer inflation is expected to moderate to 5% on average in fiscal 2024 from 6.8% in fiscal 2023, primarily due to the high-base effect and some softening of crude and commodity prices. "A good rabi harvest would help cool food inflation, while the slowing economy should moderate core inflation."

CRISIL's GDP forecast for FY24 is lower than what's projected by the Reserve Bank of India and the central government. The RBI has pegged India's real GDP growth at 6.4% for FY24 and 7% for FY23. The GDP growth for Q1 of FY24 is projected at 7.8%, for Q2 at 66.2%, Q3 at 6% and Q4 at 5.8%. On the other hand, the Economic Survey 2022-23 outlined the country's FY 2023-24 GDP growth at 6-6.8%, making it the slowest annual GDP growth in the past three years.

Despite hopes of a dip in inflation, the risks are said to be tilted upward, given the ongoing heat wave and the World Meteorological Organisation’s prediction that an El Niño warming event is likely over the next couple of months, says CRISIL.

Amish Mehta, managing director and CEO of CRISIL, says India’s medium-term growth prospects are healthier. "Over the next five fiscals, we expect GDP to grow at 6.8% annually, driven by capital and productivity increases. What is also good to see is the increasing sustainability footprint of capex. At present, nearly 9% of the infrastructure and industrial capex is green. We see this number rising to 15% by fiscal 2027. Down the road, the impact of climate risk mitigation will be felt across revenue, commodity prices, export markets and capital spending.”

Capital investments, at a higher scale by the government and expected fresh ones by the private sector, are expected to drive medium-term growth, while digitalisation and efficiency-enhancing reforms could raise the contribution of productivity. Improving physical infrastructure, connectivity and lower logistics costs for industries are also expected to get a boost, while digital infrastructure will bring efficiency gains by serving as a platform for innovation and efficient payment systems, says the report.

As for India Inc, revenue growth is expected to touch double digits in fiscal 2024, despite a global slowdown and interest rate hikes, an analysis of 748 listed companies shows. As per CRISIL, while the government policies will continue to push industrial capex and new-age opportunities, infrastructure spending will drive 12-16% growth in overall capex next fiscal. "This is to achieve nearly 75% of the initial targets set under the National Infrastructure Pipeline by fiscal 2025."

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