India’s Rise: What’s It’s Position Amidst 2024 Global Soft Landing?

It’s no surprise that the India economy has been climbing the economic ladder with its genuine acceptance of its culture and proliferation of it around the world in addition, key initiatives which have put it as a reliable ally in the economy and also several schemes wherein new technology are being invented within the state. 

All this has been leading to the India economy becoming a global superpower and now the 5th largest economy in the world. 

However, the question that’s posed is where India’s economy stands while it prepares for a likely soft landing in the year 2024. 

The Story Unfolding: 

The global economy was supposed to be at a crossroads in the year 2023 but it had fared ‘relatively ok’ despite a few hiccups and now there’s a high possibility of a soft landing in 2024, according to DBS economics outlook and Market strategy 2024. 

Included within the strategic study were “High-interest rates, fiscal correction after the pandemic, lingering lockdown related friction in China along with shadows over the asset markets. 

This particular report was compiled by DBS Chief Economist Taimur Baig and Senior Economist Radhika Rao. 

However, even though there were contrary projections, the global economy had maintained stability this year. 

Top Contenders in the Soft Landing: 

The US, India and China are eyed in the list of high-growth countries. 

The US being the world’s largest economy is poised to end 2023 with a stronger growth rate than the preceding year. Similarly, Both China’s and India economy are anticipated to exhibit higher growth rates by the year’s end. 

Despite the positive outlook, there are issues wherein the economic landscape may change. 

As per the DBS study, they consider 3 potential scenarios:

60% chance in Soft Landing – 

The forecast suggests a gradual softening of the demand in the US and the EU due to high interest rates but as per the report, a recession is unlikely in these regions. 

In China, however, efforts are en-route to rectify the property and tech sectors are underway, aiming to maintain growth above 4%. The scenario currently hinges on a stable financial sector. 

No Landing at all: 

In this scenario, the probability of a no-landing scenario has increased.  Investors are however hopeful that the central banks might not be immediately easing rates, but as inflation risk diminishes, the policies could pivot towards relaxation, thereby enhancing consumption and investment sentiments. 

Hard Landing (15%) – 

Although assigned a lower probability, a hard landing scenario isn’t improbable, or as DBS says “one-in-six is not a trivial proposition at all”. Continued inflationary pressures, possible interest rate increases and instability in financial markets could lead to volatile results in the debt market. If central banks are unable to contain rising interest rates, global economic risks could increase.

Trajectory of The India Economy – How does it hold up? 

The India economy has showcased resilience amidst the global uncertainties. With strong manufacturing and urban spending outpacing that of rural demand and bolstered investment, the country is crunching numbers towards a promising growth trajectory. 

Positive signals from high-frequency indicators in the final quarter of 2023 have shaped an optimistic view of India’s GDP growth. In response to these indicators, DBS has adjusted its growth target for FY24, increasing it to 6.8% from 6.4%.

With the upcoming general elections in April-May 2024, there is an anticipation of a surge in consumption during the campaigning period. Despite the elections, the investment landscape is likely to adopt a cautious stance, adopting a wait-and-watch strategy. Post-election, there is an expectation of an interim FY25 Budget that prioritizes capital expenditures.

India’s proactive efforts to diversify its manufacturing sector beyond China have attracted global firms, particularly strengthening its presence in the telecom/handphone assembly sector. DBS highlights that fiscal incentives, combined with a revitalized private sector and substantial infrastructure investments, create a favorable environment for growth.

While inflation may persist above the target in FY24 and FY25, the Reserve Bank of India (RBI) is expected to maintain a cautious stance. The potential for rate cuts may emerge in the latter half of FY25, supported by robust foreign reserves and manageable external balances.

DBS anticipates that growth for FY25 will average 6%. India’s trajectory amid global economic uncertainties reflects a promising journey, bolstered by a robust manufacturing push, strategic investments, and a resilient economic outlook.

Economic Perspective from Commodity Samachar:

This is nothing but good news for India if the cards are in favour of the nation. The analysts at Commodity Samachar had an alignment with the report and here’s what they have to say

” The year 2024 is going to be a great time for the Indian economy as in the beginning of February, the Finance Minister Nirmala Sitharam will be presenting the interim budget for the fiscal year 2024- 25 on February 1st. 

In addition to this, the elections are scheduled for March next year. If the current ruling party comes into power once again, there will be a positive outlook for the economy and if it’s vice versa, things might flow toward an opposite location. 

Coming towards a technical outlook, all traders have seen that the stock market has hit a new lifetime high without much support from the downside. It has tested the support and has head upwards.”

Commodity Samachar
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