May 21st 2024.
ICRA, a domestic rating agency, has predicted that India's GDP growth will slow down in the March quarter of the 2023-24 fiscal year, reaching its lowest point in four quarters at 6.7%. However, for the entire fiscal year of 2023-24, they estimate that GDP growth will still come in at a respectable 7.8%. The Indian economy has been on a steady growth trajectory, with growth rates of 8.2%, 8.1%, and 8.4% in the previous three quarters. However, ICRA's Chief Economist, Aditi Nayar, believes that lower volume growth and diminishing gains from commodity prices will dampen India's GVA (gross value added) growth in the fourth quarter of the fiscal year.
In the previous fiscal year of 2022-23, India's GDP growth was at 6.1% in the March quarter, with the full fiscal year growth at 7%. The numbers for the fourth quarter of the current fiscal and provisional estimates for the next fiscal are set to be released on May 31. According to ICRA, the gap between GDP and GVA growth is expected to narrow down to 100 basis points in the fourth quarter of the fiscal year, compared to 185 basis points in the previous quarter. This is due to a lower expansion in net indirect taxes, as the subsidy outgo is expected to decrease.
For the entire fiscal year of 2023-24, ICRA predicts that GDP and GVA growth will be at 7.8% and 7% respectively, unless the growth for the first nine months is revised. It's worth noting that GDP is the total value of goods and services produced in a given period, while GVA is GDP minus net taxes. Nayar believes that despite concerns over the impact of unfavorable monsoon rains on agricultural output, there are signs of a potential revival in rural demand. Retail tractor volumes have shown a year-on-year expansion of 7.7% in the fourth quarter, after a decline of 4% in the third quarter. Additionally, some listed FMCG companies have reported a recovery in the rural economy, especially in the non-food segment, in the fourth quarter.
Investment activity in the March quarter of the fiscal year has been healthy, according to ICRA, with a surge in new project announcements and an increase in completions of both private and government-led projects. However, some investment-related indicators have shown a slowdown in the March quarter compared to the previous quarter, possibly due to caution during the Model Code of Conduct in March and the uncertainty surrounding the Parliamentary elections. The government's capital expenditure is estimated to have grown by 31.6% in January-February 2024, but may have eased in March due to the Model Code of Conduct.
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