Global Economic Landscape in FY 2023-24

Financial Year 2023-24 marked a pivotal moment in global geopolitics, impacting international relations across continents. Despite these challenges, the global economic recovery proved surprisingly resilient. Inflation receded in major economies, recessions were largely avoided, supply chain disruptions eased, and labor markets remained historically tight. Global growth rose to an estimated 3.2% in 2023, up from 2.3% in 2022, driven by resilience in the United States, large emerging markets, and fiscal support in China. The International Monetary Fund (IMF) forecasts continued growth at 3.2% for 2024 and 2025.

Decisive Monetary Policy Actions

Central Banks Lead Disinflation Efforts

Decisive actions by central banks globally resulted in a sharp disinflation process. Headline inflation fell to 6.8% in 2023 from a peak of 9.4% in 2022 and is expected to decrease further in 2024. However, future rate cuts remain uncertain due to potential commodity price spikes from geopolitical tensions, including the war in Ukraine and conflicts in the Middle East, alongside persistent core inflation. Financial market expectations for US policy rate reductions this year have been significantly reduced.

US Dollar and Global Equity Markets

Strength and Performance

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The US dollar (DXY) remained strong, bolstered by resilient economic growth and hawkish Federal Reserve policy commentary. Global equity markets ended the financial year on a high, with the strongest performance since 2019. Major markets such as the US, India, and Japan experienced a bull run due to prospects of monetary easing, robust corporate profitability, and anticipated productivity gains related to artificial intelligence. Crude prices remained volatile amidst sanctions on Russia, conflicts in the Middle East, and production cuts by OPEC+.

India: Fastest Growing Major Economy

Economic Resilience and Diplomatic Finesse

India emerged as the fastest-growing major economy in 2023-24, adeptly navigating diplomatic challenges. The country’s GDP growth for FY 2023-24 was pegged at 7.6%, driven by strong domestic demand and robust macroeconomic fundamentals. The upturn in the investment cycle, broad-based revival in manufacturing and services sectors, and government’s capex push fueled this growth. Consumer price inflation (CPI) dropped to 5.4% from 6.7% in the previous year, attributed to base effects, normal monsoon, and supply-side interventions.

Monetary Policy and Banking Sector

Stability and Growth

The Reserve Bank of India (RBI) Monetary Policy Committee kept the policy repo rate unchanged at 6.5% since its last hike in February 2023. Bank credit growth remained robust with improving economic activity, increasing by 16.3% year-on-year as of March 2024. Corporate borrowing costs generally hardened amidst tightening liquidity conditions.

Foreign Exchange and Investment Flows

Strong Fundamentals and Record Reserves

The Indian Rupee remained largely range-bound, depreciating by 1.4% during the year due to strong macroeconomic fundamentals and improvements in India’s external position. The current account deficit (CAD) moderated, capital flows revived, and foreign exchange reserves hit a record high of US$ 645.6 billion on March 29, 2024. Net Foreign Portfolio Investment (FPI) inflows reached US$ 41.6 billion in 2023-24, the highest since 2015-16.

Key Facts Table for FY 2023-24

This table summarizes the critical economic indicators and performance metrics for the global economy and India during the financial year 2023-24.

(India CSR)