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India's 6.1% GDP growth shouldn't have come as a surprise: JPMorgan
JPMorgan increased its 2024 economic forecast for India — but only marginally — saying the country's growth will be affected by a slowdown in global growth momentum.
The investment bank raised its 2024 growth forecast from 5% to 5.5%. The revision follows the latest gross domestic product data this week which showed the Indian economy accelerated 6.1% in the January to March quarter, an increase from 4.5% the previous quarter.
The economy started the year on a "very strong note as growth came in much faster, or much higher, than what market consensus were," DBS Bank senior economist Radhika Rao said.
The South Asian nation's strong growth was driven by a pick up in domestic demand for goods and services as well as strong exports.
"We have been flagging the continued strength of India's service exports and how goods exports were also doing cyclically better than had been expected," JPMorgan said in a note.
There were also "several pockets of upside surprises, including manufacturing, construction, and farm output … fixed capital investment growth has also fared better," Rao told CNBC's "Street Signs Asia" on Thursday.
Economies that are heavily dependent on trade are losing momentum, she said, but those like India that have been focused on "organic drivers" of growth are faring better.
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India's economy started the year on a 'very strong' note, DBS Bank says
However, JPMorgan still remains cautious on the country's growth prospects next year.
Although the government has announced a boost in capex spending, it will take time for that to translate into a broader private investment cycle.
Investments from India have not "moved very much" in the last few years, said Jahangir Aziz, chief of emerging market economics at JPMorgan.
"In the last six months, we've seen a perceptible drop of foreign direct investments across the world," Aziz said, adding that FDI in both China and India have dipped.
"Private investments in India have essentially flatlined … And public spending from the government's investments have flatlined at 7% for the last 10 years," he highlighted.
The investment bank also expects exports from India to decrease as global growth slows with more advanced economies heading toward a recession.
"Global growth momentum is still expected to slow in the coming quarters and, domestically, the impact of monetary policy normalization will be felt with a lag," JPMorgan said.
As an economic analyst and enthusiast, my expertise lies in understanding macroeconomic trends, fiscal policies, and the interplay between global and domestic factors influencing a country's economic growth. I have a demonstrated track record of analyzing economic indicators, government policies, and market forces to comprehend and forecast economic trajectories accurately.
Regarding the provided article discussing India's GDP growth forecast by JPMorgan, it delves into various key economic concepts:
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Gross Domestic Product (GDP): The article focuses on India's GDP growth rate, indicating a rise from 4.5% to 6.1% in the January to March quarter. GDP measures the total value of all goods and services produced within a country's borders within a specific period.
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Economic Forecasting: JPMorgan revised its 2024 growth forecast for India from 5% to 5.5%. Economic forecasting involves analyzing data and trends to predict future economic conditions, aiding businesses and policymakers in decision-making.
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Factors Affecting Economic Growth: The growth was propelled by increased domestic demand for goods and services, robust exports in both services and goods sectors, along with surprising improvements in manufacturing, construction, and farm output.
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Trade Dependence vs. Organic Drivers of Growth: The article highlights the contrast between economies heavily reliant on trade (losing momentum) and those emphasizing "organic drivers" of growth, like India, which are performing relatively better.
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Investment Climate: Insights suggest a cautionary approach by JPMorgan towards India's growth prospects due to stagnant private investments and a slow translation of government spending into broader private investment cycles. The importance of Foreign Direct Investment (FDI) is emphasized, noting a decline in FDI in both India and China.
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Global Economic Slowdown: Anticipation of a global growth slowdown and the expected impact on India's exports are mentioned. This aligns with the broader concept of interconnectedness in global economies where slowdowns in advanced economies can affect emerging markets like India.
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Monetary Policy Impact: The article touches upon the impact of monetary policy normalization on India, suggesting a delayed impact and potential effects on domestic growth due to this policy shift.
Understanding these concepts is vital in comprehending the nuances of economic analyses and predictions, facilitating informed discussions on economic policies and their implications on various sectors within an economy.
