India's Q4 GDP growth projected at 6.7%, FY24 growth at 7.8%, says ICRA

The Indian economy grew 8.2 per cent in the June quarter, 8.1% in the September quarter and 8.4% in the December quarter of 2023-24

Domestic rating agency ICRA on Tuesday projected India's GDP growth to moderate to a four quarter low of 6.7 per cent in March quarter of 2023-24 fiscal.

For the full 2023-24 fiscal, ICRA estimates GDP growth to come in at 7.8 per cent.

The Indian economy grew 8.2 per cent in the June quarter, 8.1 per cent in the September quarter and 8.4 per cent in the December quarter of 2023-24.

ICRA Chief Economist, Head-Research & Outreach Aditi Nayar said the lower volume growth coupled with diminishing gains from commodity prices dampening the profitability of some of the industrial sectors is expected to dampen India's GVA growth in Q4 FY2024.

India's GDP expanded 6.1 per cent in the March quarter of 2022-23 fiscal, as per May 31, 2023 estimates. The growth for full fiscal 2022-23 was 7 per cent.

The GDP numbers for the fourth quarter (January-March 2024) and the provisional estimates for the 2023-24 fiscal are scheduled to be released on May 31.

ICRA, in a statement, said the gap between gross domestic product (GDP) and gross value added (GVA) growth is likely to moderate to 100 basis points (bps) in Q4 FY2024 from the particularly high of 185 bps in the previous quarter.

This is on account of an expected lower expansion in the net indirect taxes in the March quarter owing to a narrower dip in the subsidy outgo.

For the full-year FY2024, ICRA expects the GDP and GVA growth to print at 7.8 per cent and 7 per cent, respectively, unless the growth for nine months of FY2023-24 is revised.

GDP is the total value of goods and services produced in a given period. GVA is GDP minus net taxes (gross tax collection minus subsidy).

"Notwithstanding the overhang of the unfavourable 2023 monsoon rains on agri output, there are some green shoots suggesting that a nascent revival in rural demand may be on the anvil," Nayar said.

She said the domestic retail tractor volumes reverted to a Year-on-Year (YoY) expansion of 7.7 per cent in Q4 FY2024, after contracting by 4 per cent in Q3 FY2024.

Moreover, some listed FMCG players pointed to a recovery in the rural economy, particularly in the non-food segment, in the fourth quarter of FY2024.

"This can be partly attributed to the uptick in demand during the marriage season as well as a low base. Additionally, urban consumption is expected to have remained robust, albeit uneven in Q4 FY2024," Nayar added.

ICRA said investment activity was healthy in the March quarter of FY2024, amidst a mixed trend displayed by various investment-related lead indicators.

There was a surge in new project announcements to the second-highest quarterly level owing to the state investor meets held in January 2024 and an appreciable increase in completions of both private and government-led projects, it said.

However, some investment-related indicators moderated in the March quarter of FY2024 vis--vis the December quarter, along with an implicit slowdown in new project proposals in February-March 2024, relative to January 2024. This reflects some transient caution amid the onset of the Model Code of Conduct in March 2024 and the uncertainty owing to the Parliamentary elections, ICRA added.

ICRA estimates the government's capital expenditure expanded by 31.6 per cent YoY to Rs 1.3 trillion in January-February 2024, but may have eased in March 2024 on a YoY basis amidst the Model Code of Conduct.