Projection surpasses MPC’s estimations of 6.5% for same period
NEW DELHI: Experts anticipate the gross domestic product (GDP) growth rate to moderate slightly to 6.9%-7.0% in the second quarter of the current financial year (Q2FY24) from 7.8% in Q1FY24 on account of global slowdown, erratic monsoon and base effect.
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This projection surpasses the estimations made by the RBI’s policy-making body Monetary Policy Committee (MPC), which had forecasted a growth rate of 6.5% for the same period. The government will announce the Q2 GDP numbers by the end of this month.
According to the credit rating agency ICRA, the gross value added (GVA) growth is also expected to ease to 6.8% in the second quarter of the current financial year from 7.8% in the first quarter. The services sector is predicted to contribute significantly to this growth, with an estimated growth rate of 8.2% (compared to 10.3% in Q1 FY24).
The agriculture sector is expected to witness a slowdown, projecting a growth rate of 1.0% in Q2 FY24 (down from 3.5% in Q1FY24).
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However, the industry sector is forecasted to improve, with a growth rate of 6.6% (compared to 5.5% in Q1FY24). Aditi Nayar, chief economist, head-research & outreach at ICRA Ltd, noted that the moderation in GDP growth for Q2FY24 is likely due to a normalising base and erratic monsoon patterns.
“A normalising base and an erratic monsoon are expected to result in a sequential moderation in the GDP growth to 7% in Q2FY24 from 7.8% in Q1FY24. Regardless, we anticipate that the GDP expansion in this quarter will exceed the Monetary Policy Committee’s October 2023 projection of 6.5%,” Nayar said.
According to her, these factors include uneven rainfall, narrowing differentials with year-ago commodity prices, a potential slowdown in government capital expenditure as parliamentary elections approach, weak external demand, and the cumulative effects of monetary tightening.
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As a result, the rating agency maintained its GDP growth estimate for FY24 at 6.0%, which is lower than the MPC’s projection of 6.5% for the current financial year. Meanwhile, Paras Jasrai, Senior Analyst, India Ratings and Research said, “The q2 GDP growth would be getting a boost from the net exports front. The moderation in q2 (6.9%) compared to 7.8% YoY in q1 would be emanating from the consumption demand due to spike in inflation in the same period.”
