India's Economic Indicators Remain Strong, Long-Term Growth Prospects Stable: Report

Synopsis

India’s macros are robust despite global growth challenges, with long-term prospects projected at 6.5% real GDP growth and 10-11% nominal GDP growth. The banking sector shows strength, and corporate profits are growing significantly, according to a report from Mirae Asset.

Key Takeaways

India's macros remain strong
Projected real GDP growth: 6.5%
Nominal GDP growth expected: 10-11%
NPAs in banks below 1%
Rural consumption may rise

New Delhi, Jan 15 (NationPress) India’s macros (like fiscal consolidation, strong balance sheets, and recovery in consumption) continue to be robust despite a slowdown in global growth, with the nation’s long-term growth outlook remaining steady. The projected figures stand at 6.5 percent real GDP growth and 10-11 percent nominal GDP growth, as stated in a report released on Wednesday.

The strength of the banking sector (with NPAs below 1 percent) and corporate balance sheets is highlighted. India Inc.’s profits are witnessing significant growth, generating substantial free cash flows, a stark contrast to the 2003-2008 period when free cash flows were in deficit, according to the monthly insight report from global financial services firm Mirae Asset.

Household debt levels remain reasonable by global standards. India's total debt to GDP ratio is lower than it was in 2010, even as global debt levels have increased, the report indicates.

The valuation of the Nifty 50 Index stands at 19 times FY26E and 17 times FY27E P/E, which is justified given the anticipated mid-teens CAGR earnings growth from FY23 to FY27. This earnings growth is widespread, providing enhanced certainty,” the report stated.

“Certain sectors, especially in industrials, are still trading at a premium. A mean reversion is expected in these highly valued sectors,” it added.

On the agriculture front, a further revival is anticipated as the kharif crop and price outlook remain favorable. The forthcoming rabi crop is also expected to be positive.

The area sown for various rabi crops in the country this season has increased to 632.3 lakh hectares, up from 631.4 lakh hectares during the same period last year, as per the latest government data.

Government capital expenditure is expected to rise in H2 FY25. Rural consumption may counterbalance the decline in urban consumption, presenting a positive scenario with the ongoing harvest and the start of the next season, according to the report.

“We also predict that state government welfare expenditures will support the recovery of consumption. Monetary policy stimulus could also play a role in reviving growth in the near to medium term,” it further mentioned.

Overall, while there are rising near-term concerns that could impact investor sentiment, the medium to long-term narrative for India remains intact, concludes the report.