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Business News/ Economy / Q1 GDP preview: India Q1 GDP print may beat RBI MPC forecast
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Q1 GDP preview: India Q1 GDP print may beat RBI MPC forecast

India's Q1FY24 GDP growth likely to exceed projections, with estimates ranging from 7.8% to 8.5%.

Rating agency ICRA has projected the year-on-year (YoY) growth of the GDP to improve to 8.5 per cent in Q1FY24 from 6.1 per cent in Q4FY23. (Agencies)Premium
Rating agency ICRA has projected the year-on-year (YoY) growth of the GDP to improve to 8.5 per cent in Q1FY24 from 6.1 per cent in Q4FY23. (Agencies)

The GDP figures for the first quarter of the current financial year (Q1FY24) might exceed the projections set by the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC), supported by healthy government capital expenditure, improved investment activity and the low base of the same quarter last year. Experts point out that the statistical effect of a dip in trade deficit and the deflation method used to compute GDP may also boost the figures.

India's real GDP in the quarter ended March 2023 had grown at 6.1 per cent as compared to the year-ago period.

Growth to be strong in Q1FY24

Rating agency ICRA has projected the year-on-year (YoY) growth of the GDP to improve to 8.5 per cent in Q1FY24 from 6.1 per cent in Q4FY23, boosted by the supportive base of the same quarter last year, which saw the Indian economy normalising after the Covid-19 pandemic.

ICRA expects the GVA (gross value added) growth at 8.1 per cent in Q1FY24 against 6.5 per cent in Q4FY23), driven by the recovery in the services sector (+9.7 per cent versus +6.9 per cent).

"Economic activity in Q1FY24 was boosted by a continued catch-up in services demand and improved investment activity, particularly a welcome front-loading in government capital expenditure. Moreover, sharply lower prices of various commodities on a YoY basis supported margins in some sectors. However, unseasonal heavy rains, the lagged effect of the monetary tightening and weak external demand exerted downward pressure on GDP growth," said Aditi Nayar, Chief Economist, Head of Research and Outreach at ICRA.

"We peg GDP growth in Q1FY24 at 8.5 per cent, exceeding the Monetary Policy Committee’s (MPC’s) forecast of 8 per cent. However, we are circumspect that erratic rainfall, narrowing differentials with year-ago commodity prices, and a possible slowdown in the momentum of government capex as we approach the parliamentary elections, could dampen GDP growth in the second half of FY24 below the MPC’s forecasts. Overall, we maintain our FY24 GDP growth estimate at 6 per cent, lower than the MPC’s projection of 6.5 per cent for the fiscal," Nayar said.

Dipti Deshpande, Principal Economist at CRISIL also expects the Q1 GDP number to be above the RBI MPC estimates.

"We expect GDP growth at 8.2 per cent on-year in Q1FY24. Domestic economic activity is expected to be robust benefited by a sharp fall in input costs during the quarter and strong urban demand as services activity stayed robust. Also, supportive will be strong government capex spending (both centre and state) on infrastructure. Slowing global demand dents on exports would be visible through the price effect could be stronger than the volume effect on exports," said Deshpande.

On the other hand, economists at SBI have pegged India’s economic growth for the June 2023 quarter at 8.3 per cent. They expect total FY24 growth to be higher at 6.5 per cent.

According to the median of the estimates given by 22 economists in a Mint poll, India's Q1 is expected to come around 7.8 per cent.

Read more: In charts: How economists place India’s Q1 growth bets

Disclaimer: The views and recommendations above are those of individual analysts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 29 Aug 2023, 03:00 PM IST
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