JPMorgan raises 2024 GDP forecast for India, but says headwinds remain

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. 

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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. 

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.