Investment is set to power a pickup in India's growth in the year ahead. An increase in public capital expenditure and incentives aimed at expanding manufacturing capacity are set to spark a private-investment cycle. The Reserve Bank's hold in April after a series of rate hikes to fight inflation also signals a shift to supporting growth.

Investment is set to power a pickup in India’s growth in the year ahead. An increase in public capital expenditure and incentives aimed at expanding manufacturing capacity are set to spark a private-investment cycle. The Reserve Bank’s hold in April after a series of rate hikes to fight inflation also signals a shift to supporting growth.

We forecast the expansion in GDP to accelerate to 5.9% year on year in the first quarter of 2024 from an estimated 5.0% in 1Q23.

On a full-year basis, growth will be distorted by pandemic effects — a low base contributed to a surge to 7.1% in fiscal 2023. Coming off the high comparison, growth is poised to slow to 6% in fiscal 2024.

Inflation is likely to slide to 5.3% on average in fiscal 2024 from 6.7% in fiscal 2023, due to lower commodity prices, lagged impacts of the RBI’s rate hikes, and base effects.

We see the RBI keeping its repo rate on hold at 6.5% through the end of 2023, avoiding over-tightening that could damage the economy. As consumer prices cool, we expect it to ease in 1Q24 to add support for the recovery.

Eoin Treacy's view

India’s politicians have to create friendly conditions for employment growth over the next decades if some semblance of civility is to be sustained. Modi’s administration has played up nationalistic fervour by feeding into sectarianism. That’s not great for standards of governance which means there will need to be more focus on how well develop goals are executed.
The Aberdeen New India Investment Trust continues to firm from the region of the 1000-day MA and trades at a discount to NAV of 17.8% which is wide by historical standards.