India’s GDP likely to have grown 7.8-8.5% in June qtr: Economists

ICRA said economic activity in Q1 FY2024 was boosted by a “continued catch-up in services demand and improved investment activity”, particularly front-loading of the government capital expenditure. “We peg GDP growth in Q1 FY2024 at 8.5 per cent, exceeding the Monetary Policy Committee’s (MPC’s) forecast of 8.0 per cent. However, we are circumspect that erratic rainfall, narrowing differentials with year-ago commodity prices, and possible slowdown in momentum of Government capex as we approach the Parliamentary elections, could dampen GDP growth in H2 FY2024 below the MPC’s forecasts. Overall, we maintain our FY2024 GDP growth estimate at 6.0 per cent, lower than the MPC’s projection of 6.5 per cent for the fiscal,” Aditi Nayar, Chief Economist, Head-Research & Outreach, ICRA said.

State Bank of India Research said in its Ecowrap report said that economic activity remained resilient mainly driven by the services sector. “More importantly, there has been a surge in capital expenditure in Q1, with Central government spending 27.8% of budgeted, while states at 12.7 per cent of budgeted. States like Andhra Pradesh, Telangana, Madhya Pradesh where are elections are due have registered capital expenditure growth up to 41 per cent,” Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI said in the report.

The growth in incremental deposits growth has almost doubled at Rs 11.3 lakh crore, compared to Rs 5.0 lakh crore last year (Rs 2.73 lakh crore received through Rs 2000 banknotes and Rs 1.5 lakh crore from HDFC merger), the report said. “Despite rising interest rates, the overall economic growth led to higher credit demand leading to banks reporting a robust rise in advances. Both the PSBs and private sector banks logged in equal pace of loan growth during Q1FY24. All the major financial parameters viz., credit deployment, profitability, asset quality, capital adequacy etc. indicate that the performance of PSBs has significantly improved,” it said.

Barclays India in a note said that construction sector will standout in April-June GDP data, as it is likely to post its second straight double-digit growth print amid front-loaded capital expenditure by both central and state governments, and a pickup in non-financial corporate investments. “Some drag to growth is expected from weaker momentum in mining, and exports, the latter given external headwinds and ebbing reopening demand. We think robust domestic demand is anchoring economic growth, with strong momentum in areas such as construction, underpinned by government capex…this should ensure that growth remains anchored close to trend levels, giving enough room for RBI to be on a long pause. We continue to believe that the window for rate cuts is closed for now, and the RBI is likely to be on hold for the rest of the fiscal year, in our view, with only a strong growth shock likely to stir it into action,” Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays said.

India’s GDP growth had clocked a higher-than-expected growth rate of 6.1 per cent in January-March, in turn pushing up the growth estimate for full year 2022-23 to 7.2 per cent. GDP data for April-June is scheduled to be released on August 31.