GDP data for July-September today: Why growth could be slower than in Q1

The services sector is seen as contributing the largest share of overall growth in the second quarter, even as services, along with agriculture, may see a slight moderation in growth.

The official GDP data for July-September (Q2) is scheduled to be released on Thursday evening (November 30).

The National Statistical Office under the Ministry of Statistics and Programme Implementation releases quarterly GDP data on the last working day of the second month after the reporting quarter. GDP growth rate was at 6.2 per cent in July-September 2022.

Growth estimates

Many economists are now expecting the growth rate to be near 7 per cent, slightly higher than the growth projection of the Reserve Bank of India (RBI). The RBI had projected 6.5 per cent growth for July-September and 6.0 per cent for October-December. Last month, RBI Governor Shaktikanta Das said the GDP growth rate for the second quarter may surprise on the upside.

Domestic demand remains the key economic driver of activity, as external demand continues to remain weak, Barclays said in a note. Barclays has projected a growth rate of 6.8 per cent for Q2.

“We expect growth rates in Q3 (July-September) to improve in basic utility sectors (ie, 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, but the overall impact of sustained improvement in services exports, coupled with lower imports, implies that the contribution of net exports to GDP was a much smaller drag in Q3 (July-September) than it has been in the preceding quarters,” Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays said.

Government expenditure — by both the Centre and states — has supported the recovery of the capex cycle. “The combination of government capex and strong growth in real estate services has supported the construction sector with pick-up in steel consumption and cement production,” IDFC FIRST Bank’s Economist Gaura Sen Gupta said in a note. IDFC FIRST Bank has projected Q2 growth rate to be 6.7 per cent.

As per latest data from the Controller General of Accounts (CGA), the government spent Rs 1.16 lakh crore as capital expenditure, which is about 49 per cent of its full-year Budget target.

“The aggregate capital outlay and net lending of 25 state governments, for which the CAG data is available, rose to Rs 1.7 lakh crore in Q2 from Rs. 1.2 lakh crore in Q1; although the pace of year-on-year expansion halved to 33.5 percent from 75.0 percent, respectively. It remained robust, benefitting from an early transfer of funds under the interest-free capex loan scheme and front-loaded tax devolution,” ICRA’s Chief Economist Aditi Nayar said.

Growth outlook for the rest of the year

Going ahead, input cost pressures and waning of the base effect may result in slower growth rate and hence, the overall growth forecast for financial year 2023-24 is being seen around 6.2-6.7 per cent. Both the government and the Reserve Bank of India (RBI) have forecast a growth rate of 6.5 per cent for the financial year 2023-24.

Concerns on global growth remain, which in turn are likely to impact export demand. “With a palpable slowdown of major economies globally, export competitiveness seems to have hit a temporary roadblock. However, the growing commitment of global behemoths to incrementally source components and parts, apart from local manufacturing commitments aimed at exports, augurs well for the sector in times ahead,” the SBI report said.

Growth may also slow down in the second half of the financial year ahead of the elections as the impact of slowing capex and tempering of demand because of monetary tightening shows through in full, ICRA said. “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 H2 FY2024. As a result, 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,” Nayar said.