Executive summary

There are three reasons why CRISIL expects India’s gross domestic product (GDP) growth to decelerate 100 basis points to 6% in fiscal 2024 from 7% in this fiscal.

One, a slowing world — stemming from elevated inflation and aggressive rate hikes by major central banks — will create downside risks to India’s growth. Domestic demand, therefore, will have to do the heavy lifting next fiscal.

Two, the full impact of rate hikes by the Reserve Bank of India (RBI) will manifest next fiscal. Monetary moves typically impact growth with a lag of 3-4 quarters.

Three, the tricky geopolitical situation implies that India will continue to reckon with volatility in crude and commodity prices.

But some optimism is in order on the domestic inflation front.

Consumer inflation is expected to moderate to 5% next fiscal from 6.8% this fiscal, owing to a high-base effect.

A good rabi harvest would help cool food inflation and a slowing economy to moderate core inflation.

The risks to this are, however, tilted upwards, given the ongoing heat wave and the World Meteorological Organization’s prediction that an El Niño warming event is likely in the next couple of months. That can hurt farm output.

The picture, however, is better over the medium term.