ICRA projects India`s GDP growth to moderate sequentially to 7% in Q2FY24
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Rating agency ICRA in its latest report has projected India’s year-on-year (YoY) growth of the Gross domestic product (GDP) to moderate sequentially to 7% in Q2 FY24 from 7.8% in Q1 FY24. It said the Gross Value Added (GVA) growth is estimated to ease to 6.8% in Q2 FY24 from 7.8% in Q1 FY24, driven by the services sector (to +8.2% from +10.3%) and agriculture (to +1.0% from +3.5%), amidst an improvement in industry (to +6.6% from +5.5%).
According to the report, India’s investment activity was quite robust in Q2 FY24. The YoY growth performance of seven of the 11 investment-related indicators improved in Q2 FY24 relative to Q1 FY24. While the YoY growth in the remaining four indicators weakened in Q2 FY24 relative to Q1, all of them witnessed a double-digit expansion in the quarter, including the CV registrations (+13.5%), cement production (+10.2%), the states’ capital outlay and net lending (+33.5%), and the Government of India’s (GoI’s) capex (+26.4%).
It further said the aggregate capital outlay and net lending of 25 state governments, for which the CAG data is available, rose to Rs. 1.7 trillion in Q2 FY24 from Rs. 1.2 trillion in Q1 FY24; although the pace of YoY expansion halved to 33.5% from 75.0%, respectively, it remained robust, benefitting from an early transfer of funds under the interest-free capex loan scheme and front-loaded tax devolution. While the GoI’s gross capital expenditure rose by 26.4% YoY to Rs. 2.1 trillion in Q2 FY24, it trailed the Rs. 2.8 trillion seen in Q1 FY24 (YoY: +59.1%), amidst the monsoons.
ICRA estimates the industrial GVA growth to have risen to 6.6% in Q2 FY24 from 5.5% in Q1 FY24, boosted by manufacturing, electricity, and mining. ICRA projects manufacturing GVA growth to witness an uptick to 5.5% in Q2 FY24 (-3.8% in Q2 FY2023) from 4.7% in Q1 FY24 (+6.1% in Q1 FY23), benefitting from higher volumes and continuing albeit slower tailwinds from commodity prices. Moreover, electricity generation witnessed a doubledigit expansion of 11.1% on a YoY basis in Q2 FY24 (+1.3% in Q1 FY24), benefitting from the surge in electricity demand (to a five-quarter high +11.7% from +0.7%; as per POSOCO data) owing to a sub-par monsoon rainfall.
