New Delhi [India], September 22 (ANI): The Department of Economic Affairs, Ministry of Finance, released its August Monthly Economic Review report, highlighting the robust performance of the corporate sector and its positive impact on investor confidence in India's growth prospects.
The report underscores that the healthy performance of the corporate sector has bolstered investor trust in the Indian growth narrative.
This renewed confidence is mirrored in the exceptional performance of Indian capital markets, which have outperformed several emerging and advanced economies.
Foreign Portfolio Investors (FPIs) and Domestic Institutional Investors (DIIs) played a pivotal role in driving market buoyancy, according to the report.
While there was a marginal increase in Government Securities (G-sec) yields, the report anticipates a decline as inflationary pressures ease.
The government's commitment to fiscal prudence is expected to maintain stability in G-sec yields.
The report cites data from the National Statistical Office (NSO), indicating that real GDP grew at 7.8 per cent in Q1 of FY24.
This growth is attributed to robust domestic demand for consumption and investment, with a decline in urban unemployment rates contributing to strong private consumption.
Both manufacturing and services sectors experienced significant output and value-added growth during this period.
The report highlights the government's emphasis on capital expenditure, which has resulted in strong domestic investment.
Measures implemented by the Union Government have incentivized states to increase their capital expenditure, further contributing to economic growth.
External demand has complemented domestic growth, with net exports contributing positively to GDP growth in Q1 of FY24.
Regarding the banking sector, various indicators show increasing resilience, including declining Non-Performing Assets (NPAs), improved Capital to Risk-weighted Asset Ratio (CRAR), and rising Return on Assets (RoA) and Return on Equity (RoE) as of March 2023. Non-Banking Finance Companies (NBFCs) have also demonstrated improvements in profitability and risk management behaviour.
The report notes consistent and broad-based growth in non-food bank credit of Scheduled Commercial Banks (SCBs) since April 2022, as per RBI estimates.
This robust banking sector health is attributed to the deleveraging process carried out by the corporate sector over the past decade.
Although the pandemic led to a temporary rise in corporate debt levels, the subsequent economic recovery improved corporate balance sheets, resulting in a decline in core debt of the private non-financial sector and improved leverage ratios.
The report also mentions that retail inflation decreased in August, with core inflation and food inflation easing.
Government interventions and monetary policy measures contributed to lowering core inflation to a 40-month low. Globally, food inflation remains high, but in India, consumer food price inflation eased to 9.9 per cent in August due to targeted measures, including buffer buildup, procurement, and subsidized distribution.
The organized sector employment indicated healthy growth, including an increase in new members joining the Employee Provident Fund Organization (EPFO) and more members rejoining than exiting the social security net.
The report commends the government's efforts to formalize labour and secure the future of unorganized workers through initiatives like the Atal Pension Yojana and PM-SYM, fostering long-term inclusive growth.
While the report acknowledges risks like rising crude oil prices, monsoon deficits, potential stock market corrections, and ongoing global uncertainties, it remains optimistic, maintaining its 6.5 per cent real GDP growth estimate for FY24.
In conclusion, the report underscores the resilience and positive trends in India's economic landscape, driven by a robust corporate sector, strong domestic demand, and supportive government policies.
The report comes amid debates about the state of India's economy, with some expressing concerns about household savings and economic growth.
The report provides a comprehensive overview of the economic situation and key indicators, aiming to provide a balanced perspective on India's economic health. (ANI)