Bengaluru: India’s economy is expected to have grown 7 per cent in the July-September quarter of the current financial year (Q2FY24), as per economists across banks and ratings agencies. This is above the Reserve Bank of India’s forecast of 6.5 per cent for the period, but sequentially lower than the April-June quarter GDP print of 7.8 per cent, primarily due to erratic monsoon and continuing rural slowdown.
Still, GDP figures of anywhere near 7 per cent would help retain India its tag as the fastest-growing major economy. The National Statistical Office will release the official data for Q2FY24 on Thursday evening. Real GDP grew by 6.3 per cent in the same period last year.
“We forecast that the quarterly GDP growth for the Q2FY24 should be at 6.9 per cent-7.1 per cent, though there could be a forecasting bias. The mean growth rate thus comes at around 7 per cent for Q2FY24. This will firmly push up the full year growth rate over RBI projections at 6.5 per cent,” said Dr Soumya Kanti Ghosh, Chief Economic Advisor, State Bank of India.
Ghosh said that domestic economic activity in the period has been supported by robust agricultural performance, sustained buoyancy in services, strong capital expenditure by centre and states and a robust pick up in consumption expenditure.
“Headline growth likely remained resilient in Q2, with utilities, services and construction showing robust growth. Domestic demand remains the key economic driver of activity, as external demand continues to remain weak,” said Rahul Bajoria, managing director at Barclays. Bajoria expects Q2 GDP growth at 6.8 per cent.
“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,” he said.
Bajoria said that domestic demand is the key engine of the economy, and strong growth is expected in basic utility sectors like mining and electricity generation, as well as in manufacturing, construction and public spending.
“These will likely help mitigate the loss of momentum in financial services and trade & transport. Export growth is likely to stay weak,” Bajoria said.
SBI’s Ghosh also echoed the sentiment of weak exports continuing to be a drag on the economy, saying that concerns on global growth remain. “With a palpable slowdown of major economies globally, export competitiveness seems to have hit a temporary roadblock,” he said.
Aditi Nayar, Chief Economist at ICRA Ltd, said that uneven monsoon and subdued rural growth remains a concern, something which industry titans like Maruti Suzuki’s RC Bhargava, Nestle India’s Suresh Narayanan and Dabur’s Mohit Malhotra have pointed out to DH in their interactions.
“A normalising base and an erratic monsoon are expected to result in a sequential moderation in the GDP growth to 7 per cent in Q2FY24. Regardless, we anticipate that the GDP expansion in this quarter will exceed the Monetary Policy Committee’s October 2023 projection of 6.5 per cent,” Nayar said.
She said that looking ahead, uneven rainfall, a possible slowdown in momentum of government capital expenditure, weak external demand and the cumulative impact of monetary tightening are likely to translate into lower GDP growth in the second half of the financial year.