The GDP data for the latest January-March 2024 quarter is set to be released at 5:30 pm on Friday, May 31. The quarter witnessed higher commodity prices dampening the profitability of some industrial sectors. Therefore, analysts expect a slower GDP growth of 5.9 per cent-6.7 per cent for Q4 FY24, compared with 8.4 per cent in the preceding quarter (Q3 FY24).
Rating agency Icra expects India’s GDP to grow 6.7 per cent in Q4FY24, State Bank of India (SBI) sees a 5.9 per cent growth, Kotak Institutional Equities pegs the Q4 GDP growth at 6.1 per cent. Though India Ratings and EY expect the Indian economy to expand by 6.2 per cent and 6.5 per cent, respectively, the RBI sees the country’s GDP growth at 7.3 per cent in the January-March 2024 quarter. Here’s what you need to watch out for in the latest GDP numbers:
Consumption
Private final consumption expenditure is the largest component accounting for about 60 per cent of the GDP. Its movement has a huge weightage on the entire GDP number.
In the preceding quarter ended December 2023, private final consumption expenditure (PFCE) grew 3.51 per cent year-on-year to Rs 25.60 lakh crore, while the government final consumption expenditure (GFCE) fell 3.16 per cent YoY to Rs 3.41 lakh crore.
“Rural consumption is likely to pick up pace, but exports growth could be impacted in the second half of the current fiscal,” said Kotak Mahindra Bank Chief Economist Upasna Bhardwaj.
Investment and Infrastructure
Gross fixed capital formation (GFCF) is an indicator of investment activity in the country. A growth in GFCF indicates a jump in investment in the country.
“Investment activity was healthy in Q4 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, as well as an appreciable increase in completions of both private and Government-led projects. However, some investment-related indicators moderated in Q4 FY2024 vis-à-vis Q3, along with an implicit slowdown in new project proposals in February-March 2024, relative to January 2024,” ICRA said in a note.
Agriculture Growth
Agriculture is the sector that remained resilient during the pandemic period. It provided positive growth when all other sectors posted negative growth during the lockdown.
However, as the year 2023 was an El Nino year causing shortfall in rains, India’s agriculture sector declined to minus 0.8 per cent growth in Q3 FY24.
“The agricultural GVA is expected to contract for the second straight quarter in Q4 FY2024 (-0.5%), at a pace similar to Q3 (-0.8%), amid weak trends in the rabi output (barring wheat) and concerns related to yields,” said ICRA.
Bhardwaj also said agriculture sector growth could be a laggard in Q4 FY24 and see contraction during the quarter.
Manufacturing Growth/ Industrial Sector
Manufacturing growth was hit majorly first during the coronavirus pandemic and then due to the Russia-Ukraine war that led to supply disruptions, which increased commodity prices and thus input costs for companies.
“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,” said Aditi Nayar, chief economist and head (research and outreach) at ICRA.
ICRA estimates the industrial GVA growth to record a broad-based moderation to 7.9% in Q4 FY2024 from 10.4% in Q3 FY2024, led by all four sub-sectors, namely, manufacturing (to +8.0% from +11.6%), electricity (to +7.5% from +9.0%), construction (to +8.5% from +9.5%), and mining and quarrying (to +5.5% from +7.5%).
GDP is the total value of goods and services produced in a given period, while GVA is GDP minus net taxes (gross tax collection minus subsidy).
Services Sector Growth
ICRA estimates the YoY expansion in the services GVA to ease slightly to 6.2% in Q4 FY2024 from 7.0% in Q3 FY2024. The YoY growth in India’s services exports decelerated to 4.2% in Q4 FY2024 from 5.2% in Q3 FY2024.
The Indian economy grew 8.2 per cent in the June 2023 quarter (Q1 FY24), 8.1 per cent in the following September quarter (Q2 FY24) and 8.4 per cent in the December quarter of 2023-24 (Q3 FY24).
Apart from the Q4 GDP numbers, the provisional estimates for the 2023-24 fiscal year will also be released by the government on May 31. According to estimates, the expected growth in 2023-24 fiscal is estimated to be in the range of 7.6-7.8 per cent.
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.
For the full 2023-24 fiscal, ICRA estimates GDP growth to come in at 7.8 per cent.
The Reserve Bank, in its monetary policy review in April, projected GDP growth for 2023-24 at 7 per cent.
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