India's GDP to grow by 7% in Q2 FY24: ICRA

21 Nov '23

2 min read

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Insights

India's GDP is predicted to grow by 7 per cent in Q2 of FY24, slightly above MPC's estimate of 6.5 per cent, but lower than the 7.8 per cent in Q1.
Factors like uneven rainfall, commodity prices and pre-election government spending cuts contribute to the slowdown.
ICRA maintains 6 per cent GDP growth forecast for FY24, below MPC's 6.5 per cent projection.

India's gross domestic product (GDP) is set to grow by 7 per cent in the second quarter (Q2) of the financial year 2024, as predicted by ICRA. This growth exceeds the Monetary Policy Committee's (MPC) earlier estimate of 6.5 per cent. This marks a sequential moderation from the 7.8 per cent growth witnessed in the first quarter (Q1) of FY24.

This slowdown in GDP growth is attributed to a combination of factors, including a normalising base and variable monsoon patterns, according to ICRA. Despite the deceleration, the performance outstrips MPC's projections.

Aditi Nayar, chief economist at ICRA, highlighted the influence of uneven rainfall, commodity price trends, and a potential reduction in government capital expenditure due to the upcoming Parliamentary Elections. These factors, alongside weak external demand, and the cumulative effect of monetary tightening, are expected to result in lower GDP growth in the second half of FY24.

The gross value added (GVA) growth is also anticipated to decrease to 6.8 per cent in Q2 FY24, down from 7.8 per cent in Q1 FY24. This is largely driven by the services sector, which is expected to grow by 8.2 per cent, down from 10.3 per cent, and agriculture, which is projected to grow by only 1.0 per cent, a significant decrease from the 3.5 per cent growth in the previous quarter.

Despite these projections, India's investment activity remained robust in Q2 FY24. Seven out of eleven investment-related indicators showed improved year-on-year (YoY) growth performance compared to Q1 FY24.

In the industrial sector, the GVA growth is estimated to rise to 6.6 per cent in Q2 FY24, boosted by sectors like manufacturing, electricity, and mining. The manufacturing sector, in particular, is expected to see a growth of 5.5 per cent, benefitting from higher volumes and continued, albeit slower, tailwinds from commodity prices.

Overall, ICRA has maintained its FY24 GDP growth estimate at 6.0 per cent, which is lower than the MPC's projection of 6.5 per cent for the fiscal.

ALCHEMPro News Desk (KD)

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