“The momentum of the change in GDP is sequentially expected to be higher in Q3 2023-24, with festival demand remaining ebullient. Investment demand appears to be resilient with the government’s infrastructure spending, an uptick in private capex, automation, digitalisation, and indigenisation providing a boost,” the ‘State of the Economy’ report said.
The report is positive on investment demand, which it described as ‘resilient’ with capital goods equity indices among the top performing sectoral indices. “… Capital expenditure by states has surged alongside that of the Centre,” the report said.
On inflation, it added, “We have miles to go, but readings of around 5% and 4.9% in September and October, respectively, are a welcome relief from the average of 6.7% in 2022-23 and 7.1% in July-August 2023.”
According to the report, there is not much cause for worry on the external sector front, given the modest current account deficit — financed by resilient capital flows and one of the ‘least volatile currencies in the world’ — and healthy forex reserves.
The report notes that while the Indian rupee depreciated by 0.2% in October vis-a-vis the US dollar, the domestic currency appreciated by 1% in terms of the real effective exchange rate when measured against 40 currencies during the same period.
“India’s foreign exchange reserves have increased by $28.1 billion during the calendar year 2023 so far, which is the highest among major foreign exchange reserves holding countries,” the report said.