India Ratings revises India's FY24 GDP growth estimates to 6.2% | Mint
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Business News/ Economy / India Ratings revises India's FY24 GDP growth estimates to 6.2%
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India Ratings revises India's FY24 GDP growth estimates to 6.2%

The Indian economy grew at 7.8% in the first quarter of the current fiscal year on higher government and private capital expenditure, and strong services growth

RBI has forecast Q1FY24 real GDP growth at 7.8% and full-year growth at 6.5%. (Photo: Print)Premium
RBI has forecast Q1FY24 real GDP growth at 7.8% and full-year growth at 6.5%. (Photo: Print)

New Delhi: India Ratings and Research on Wednesday revised India's GDP growth estimate for FY24 to 6.2% from 5.9% projected earlier, citing sustained government capex, deleveraged balance sheet of corporates and banking sector, and the prospect of a new private corporate capex cycle.

The rating agency, part of the Fitch Group, however, cautioned that the Indian economy faces challenges from slowing exports, which contracted during the April-July period amid global headwinds and deficient monsoon.

"Tighter financial conditions have led to rise in the interest rate/cost of capital, and industrial growth, especially manufacturing growth continues to be tepid," the report said.

The Indian economy grew at 7.8% in the first quarter of the current fiscal year on higher government and private capital expenditure, and strong services growth.

“All these risks will continue to weigh and restrict India’s GDP growth to 6.2% in FY24 (FY23: 7.2%), and the quarterly GDP growth, which came in at 7.8% in 1QFY24, is slated to slow down sequentially in the remaining three quarters of FY24," said Sunil Kumar Sinha, Principal Economist, India Ratings and Research. “While the Reserve Bank of India (RBI) is expecting the same, it estimates the overall FY24 GDP to come in at 6.5%."

The Reserve Bank of India (RBI) has forecast Q1FY24 real GDP growth at 7.8% and full-year growth at 6.5%.

India Ratings doesn't expect consumption demand to be broad based during the ongoing fiscal.

According to the agency, private final consumption expenditure (PFCE) is expected to grow 6.9% annually in FY24 compared with a 7.5% expansion in FY23.

"The PFCE growth increased to 6.0% in 1QFY24 after languishing below 3% in 2HFY23. Wage growth is critical for consumption growth," it said.

"However, the data shows that the real wage growth of households belonging to the lower income bracket has been negative since 4QFY21 and became marginally positive only 3QFY23," it said adding that the real wage growth of households belonging to the upper income bracket rose in the range of 9.5% to 12.7% during 1QFY22 to 4QFY23.

"As a result, the current consumption demand is skewed in favour of the goods and services consumed largely by the households belonging to the upper income bracket," it added.

The report also said that private sector’s greenfield capex barring few sectors has remained slow now for several years.

"Besides capex in crude oil, base metals. power and telecom, broad basing is visible with heightened capex activity across cement, chemicals, textile, healthcare, logistics etc.," the report said.

"Although Uttar Pradesh, Gujarat and Maharashtra continue to dominate fresh capex sanctions, Odisha is coming up with projects across textile, steel and power sectors," it added.

A study published in the RBI August bulletin, titled “Private Corporate Investment: Performance and Near-term Outlook", has said that a new private corporate capex cycle is in the offing and private capex spend could reach a decadal high in FY24.

Recently, S&P Global Market Intelligence had revised its FY24 growth estimates for India to 6.6% from 5.9%, due to buoyant economic growth momentum recorded during Q1FY2024.

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Published: 20 Sep 2023, 06:29 PM IST
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