GDP progress: Indian economy likely grew 7.8% in Q1 FY24, say economists

The Indian economy is likely to have grown at 7.8% in the April-June 2023 quarter, a current survey of economists performed by ET says. The GDP progress is basically anticipated to have been pushed by robust home demand, authorities investments, and a tentative restoration in non-public funding. These might have acted as a buffer in opposition to the continued international financial slowdown. The estimated vary of GDP progress stood between 7.5% and eight.5% in the ballot.
This GDP progress might be a step up from the 7.2% progress in the earlier fiscal yr and the 6.1% progress in the previous March quarter.
However, the median forecast of seven.8% from the ET ballot is barely under the 8% projection by RBI’s for the primary quarter of the present fiscal. The official first-quarter GDP knowledge might be launched by the federal government on August 31.
Experts polled by ET are optimistic concerning the quarter’s outlook, predicting broad-based progress. Yuvika Singhal from QuantEco famous the function of agricultural worth addition in this trajectory, supported by the success of the 2022-23 rabi output.
Economists spotlight the providers sector because the prime contributor to Q1’s progress, complemented by sturdy development actions. Indicators of air and rail journey underline regular demand in the transport sector, although some moderation is anticipated as a result of capability limitations, factors Rahul Bajoria of Barclays.

Government capital expenditure, each on the central and state ranges, contributed to the acceleration of development actions. Aditi Nayar, Chief Economist at ICRA, emphasised the optimistic impact of enhanced funding exercise and authorities capital expenditure on Q1 FY2024’s financial exercise.
While there’s robust momentum in numerous areas, challenges are evident. Certain sectors like mining and exports could also be a drag to progress, says Bajoria including that the latter could also be impacted by exterior pressures and weakening demand. Factors like unseasonal heavy rains that disrupted manufacturing & logistics might have affected progress as nicely.
“Unseasonal heavy rains, the lagged effect of the monetary tightening, and weak external demand exerted downward pressure on GDP growth,” Nayar stated.
In the preliminary quarter of FY24, capital spending by states elevated by 76%, with the central authorities’s capex rising by 59.1% in comparison with the earlier yr.
The manufacturing sector additionally demonstrated sturdy progress as a result of decrease commodity costs, which bolstered margins regardless of rising volumes. However, company exercise’s progress wasn’t broad based mostly.

Yet, analysts anticipate a shift in momentum over the upcoming quarters. The results of upper rates of interest, coupled with a world financial slowdown, are likely to mood progress. The consensus amongst 22 economists polled by ET factors to a median progress price of 6.2% for the complete fiscal yr, which is under RBI’s 6.5% forecast.
“Corporate performance in the (April-June) quarter pointed to a sharp pick up in profits, though not broad-based. This reflected a cooling-off in input costs, whilst sales growth eased,” stated Radhika Rao, senior economist, DBS group.
Economists warning about potential challenges forward, together with the influence of meals worth spikes and an erratic monsoon on consumption restoration. Retail inflation escalated to 7.4% in July, exceeding the higher restrict of RBI’s goal vary (2-6%), and is anticipated to stay elevated in August.
The revival of personal funding might act as a progress catalyst, serving to India make strides towards turning into the world’s third-largest economy, in response to Debopam Chaudhuri from Piramal Group.
The finance ministry emphasised the persevering with function of home consumption and funding demand in driving progress. However, it acknowledged persistent uncertainties on the worldwide and home fronts, which could contribute to elevated inflation pressures. The ministry’s month-to-month financial report for July emphasised the necessity for vigilance by each the federal government and RBI. Economists polled by ET forecast common inflation of 5.5% in FY24, barely increased than RBI’s revised estimate of 5.4%.