India’s GDP growth is anticipated to have dipped to 6.5 percent in the October-December 2023 quarter, down from 7.6 percent in the preceding quarter, as per a Moneycontrol survey of 10 economists.
During the third quarter of the fiscal year 2022-23, India’s GDP had experienced a modest growth of just 4.5 percent.
The statistics ministry is scheduled to release GDP data for October-December 2023 at 5:30 pm on February 29. Alongside, it will unveil the second advance growth estimate for the fiscal year 2023-24 as a whole, along with the first, second, and third revised estimates of growth for the fiscal years 2022-23, 2021-22, and 2020-21, respectively.
In its initial advance estimate, the statistics ministry had projected GDP growth for the current fiscal year at 7.3 percent. However, economists polled by Moneycontrol foresee a downward revision to 6.9 percent in the second advance estimate.
Aditi Nayar, ICRA’s Chief Economist, attributes the anticipated decline in growth to various factors including lower volume growth in the industrial sector, sluggish momentum in certain investment indicators, a slowdown in government expenditure, and erratic monsoon patterns.
Nayar expects the growth rate to be even lower than the consensus at 6.0 percent.
During October-December, industrial growth, as per the Index of Industrial Production (IIP), averaged 5.9 percent, a decrease from 7.8 percent in July-September, with the manufacturing sector’s output growth slowing down to 5.1 percent from 6.8 percent.
Despite the slowdown in output growth, corporate margins in sectors such as iron and steel, capital goods, textiles, and construction may have improved due to declining input costs.
In other sectors, agricultural growth is expected to have accelerated to over 2 percent after a meager increase of 1.2 percent in July-September. Services are also anticipated to exhibit higher Gross Value Added (GVA) growth compared to 5.8 percent in July-September.
Jahnavi Prabhakar, an economist at Bank of Baroda, notes that services saw a broad-based improvement in October-December, recording 6.7 percent growth, partly due to delayed festive spending and the hosting of the 2023 cricket ICC World Cup by India from October 5 to November 19.
While the Centre’s capital expenditure growth slightly decreased to 24.4 percent year-on-year (YoY) in October-December from 26.4 percent in July-September, Nayar points out that the capital outlay and net lending of 25 state governments contracted by 3.9 percent YoY, after a surge of 42.4 percent in Q2 2023-24.
Rahul Bajoria, Managing Director and Head of EM Asia (ex-China) Economics at Barclays, emphasizes that while the headline GDP growth is moderating, it should be viewed in light of the elevated growth of 7.7 percent in the first half of 2023-24. The robust 7.6 percent growth recorded in July-September prompted upward revisions in growth forecasts for 2023-24, including by the Reserve Bank of India (RBI), whose ‘nowcast’ pegs the third-quarter growth rate at 7 percent.