Further Upgrade To India's GDP Forecast Likely, Says Axis Bank's Neelkanth Mishra

Further upgrade to India’s GDP forecasts are likely, as continuing positive surprises force an upward reset in trend growth assumptions, according to Neelkanth Mishra, chief economist at Axis Bank Ltd.

India’s GDP growth is surprising positively despite several headwinds such as fiscal consolidation, higher domestic interest rates, tightening liquidity conditions, and slowing export of goods and services, Mishra said in a report published on Monday.

"We expect further 70/20bps upgrade to FY24/25 consensus forecasts, making India’s growth revisions second only to the U.S.’," he said. The IMF forecasts and the World Bank forecast India's GDP to grow at 6.3% in FY24. Mishra estimates growth for the full year at 7%.

The U.S. growth is supported by unsustainable fiscal support and is likely to disappoint with intensifying global headwinds, because of which India's GDP growth is estimated to be lower at 6.5%, said Mishra.

He forecasts India's trend growth at 7%, as a cyclical recovery in capital formation—real estate and corporate capex—throws light on the reasons for the 2012-2019 slowdown.

According to him, India’s gap as against the pre-pandemic trend has now narrowed to 7%, and in terms of the number of years of growth lost, it has caught up to the global average.

While the gap vs the pre-pandemic trend, in terms of number of years of growth lost, has been expanding globally, for India it has been narrowing, he said. Given that this has been achieved despite continuing fiscal consolidation and monetary tightening in India, makes it more sustainable, he said.