The Indian economy is seen to have maintained its growth momentum in the second quarter of financial year 2023-24 (Q2FY24) and is estimated to have grown about 7% with robust factory expansion and higher consumption.
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While the expectation is that the GDP growth in Q2 will be higher than the Reserve Bank of India’s projection of 6.5%, the economy is seen to have slowed down from the 7.8% growth in Q1. Official data on GDP estimates for the second quarter will be released by the Central Statistics Office on November 30.
ICRA has projected the year-on-year (YoY) GDP growth to moderate sequentially to 7% in Q2 from 7.8% in Q1. It has estimated growth in the gross value added to ease to 6.8% in Q2 from 7.8% in Q1, driven by the services sector (to +8.2% from +10.3%) and agriculture (to +1.0% from +3.5%), amidst an improvement in industry (to +6.6% from +5.5%), it said in a statement on Tuesday.
Aditi Nayar, Chief Economist, Head-Research & Outreach, ICRA Ltd, said, “A normalising base and an erratic monsoon are expected to result in a sequential moderation in the GDP growth to 7.0% in Q2FY24 from 7.8% in Q1FY24.”
The agency has however, maintained its growth projection at 6% for the fiscal, which is lower than the official expectation of 6.5% growth.
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“Looking ahead, uneven rainfall, narrowing differentials with year-ago commodity prices, the possible slowdown in momentum of Government capex as we approach the parliamentary elections, weak external demand and the cumulative impact of monetary tightening are likely to translate into lower GDP growth in H2FY24,” Nayar said.
Barclays in a note also said India’s Q2 GDP growth is seen to have expanded by 6.8% YoY, slower than the previous quarter, but still showing robust sequential growth. “Underlying growth trends continue to look robust in India, with activity underpinned by domestic consumption, high levels of state-led capex, and strong growth in the utilities sectors,” said Rahul Bajoria, MD and Head of EM Asia (ex-China) Economics, Barclays.
For FY24, it has retained its forecast of GDP growth of 6.3%. It has, however, said there are risks, emanating largely from very strong consumption demand, which is visible across a variety of high frequency data. Indeed, credit growth, electricity consumption, and mobility indicators all paint a picture of economic resilience, hence, it believes the domestic economy will continue to drive growth.
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An article on the State of the Economy in the RBI monthly bulletin had also highlighted that there is wide consensus supported by nowcasts that real GDP growth will outperform the RBI projection of 6.5%. The RBI too expects growth to ease in the second half with third quarter growth seen at 6%.
