L&T Group
Annual Report Highlights
Business Responsibility & Sustainability ReportEconomy
Indian Economy
The Financial Year 2023-24 remained a mixed bag of opportunities and challenges. On one hand, domestic activity exhibited resilience on the back of strong domestic demand, whilst on the other, global geopolitical uncertainty continued to impact inflation, interest rates, and the supply chain.
Amidst global headwinds, the Indian economy has displayed strength and has grown by 8.2% for FY 2023-24, mainly driven by sustained investment through an infrastructure-driven policy by the government. Better capacity utilisation in the manufacturing sector, buoyancy in auto and real estate, healthy corporate balance sheets, strong credit momentum, higher tax collections, and acceptable levels of inflation are aptly aiding the growth prospects of the Indian economy.
India’s growth story momentum is likely to continue in the next fiscal year with sustained strength in domestic demand, easing of inflationary pressures, focussed fiscal outlay by the government, and a strong manufacturing revival. However, due to the general elections in India, public CapEx could witness a temporary slowdown in the very near-term.
While private industrial capital spending has been measured in FY 2023-24, it is expected to pick up in the next fiscal year with the ongoing global supply chain diversification trends and investors’ response to the government’s Production Linked Incentive (PLI) scheme to boost key targeted manufacturing industries.
However, headwinds from geopolitical tensions, volatility in international financial markets, geoeconomic fragmentation, continuing sea route trade disruptions, and extreme weather events pose risks to the otherwise optimistic outlook. India, given its structural reforms, strengthening physical and digital infrastructure, as well as upbeat business and consumer confidence, is in a better position to overcome these multiple challenges and emerge stronger.
Global Economy
The global economy has been in better shape than anticipated at the start of the year, having demonstrated some signs of growth, as reflected in the various high-frequency indicators. However, elevated debt levels and continuing geopolitical hostilities aggravate risks to global growth and inflation outlook in the medium-term.
The US economy has shown elasticity so far, but inflation being higher than expected has postponed rate cuts by the Fed. The US Presidential election in November is expected to contribute to the economic volatility. Further, the UK and Europe economies are still fragile. Also, concerns about the real estate bubble in China could further dampen economic revitalisation.
The medium-term outlook has worsened for many developing economies amid slowing growth, sluggish global trade, and tighter financial conditions. Additionally, the volatility in crude oil prices and the ongoing shipping disruptions through the Red Sea may further pose challenges to global supply chains and aid inflation.
The Middle East region is also feeling the pressure on account of the Israel conflict. An escalation or spread of the conflict beyond Gaza and Israel, as well as an intensification of the disruptions in the Red Sea, could have an economic impact on the region. Structural reforms remain critical to boosting growth in the Middle East region by way of diversification into clean energy and other industrial sectors besides oil.
Despite all the turmoil, India is on track to become the third-largest economy by 2027, overtaking Japan and Germany. It is also the fastest-growing large economy with the tailwinds of young demographics, improving institutional strength and strong governance.
