Q1 GDP growth seen at a four-quarter high of close to 8%

The Indian economy is seen to have grown at a four-quarter high of about 8 per cent in the first quarter of the fiscal, boosted by strong domestic demand, an uptick in the services sector as well as the government’s focus on capital expenditure.  

Most private agencies estimate that GDP growth was in the range of 7.8–8.5 per cent in the quarter ended June 30, which is roughly in sync with the Reserve Bank of India’s projection of 8 per cent growth in the period. However, growth is likely to slow down in subsequent quarters and the GDP forecast for the full fiscal still remains at about 6–6.5 per cent. The data for Q1 is set to be released on August 31.

The economy grew by 13.1 per cent in Q1 of 2022-23 aided by the normalisation of activities post the pandemic. However, growth slowed down to 6.1 per cent in Q4 of the fiscal. 

India Ratings and Research has forecast first quarter GDP growth at 7.9 per cent. “The GDP growth in the first quarter of FY24 would receive support from benign commodity prices and sustained government capex. From supply side the growth would be led by the services sector recovery,” said Sunil Sinha, principal economist India Ratings. 

Barclays has projected India’s GDP to have expanded by 7.8 per cent in the Q1. “Headline growth is expected to accelerate in Q2, rising to a four-quarter high and completing the recovery in high-contact services. Domestic demand remains the key economic driver of activity, while external demand is faltering,” said Rahul Bajoria, MD and Head of EM Asia (ex-China) Economics, Barclays.  

According to Suman Chowdhury, Chief Economist and Head - Research, Acuité Ratings & Research GDP growth in the first quarter is set to be strong at around 7.5 per cent YoY, partly driven by the favourable base but the growth print is likely to be 150-200 bps lower in the subsequent quarters. “We hold to our forecast of 6 per cent for FY24 for now,” he said. 

Other agencies are more optimistic and have indicated that the economy may have grown at over 8 per cent last quarter.  ICRA has projected the year-on-year (YoY) growth of the GDP to improve to 8.5 per cent in the first quarter, boosted by the supportive base of Q1 FY2023, which saw the Indian economy normalising after the Covid-19 pandemic. Gross fixed capital formation expected to have recorded double-digit expansion in the first quarter, it further said. 

SBI Ecowrap has forecast that the quarterly GDP growth for the first quarter of 2023-24 would be at 8.3 per cent,” said an SBI Ecowrap report. It noted that there has been a surge in capital expenditure in Q1, with central government spending 27.8 per cent of budgeted capex, while states at 12.7 per cent of budgeted capex. 

Manufacturing is sustained as reflected in better IIP, automobile sales, PMI data, it further said, adding that agriculture sales has been strong and power supply has been high. “On the services side, passenger traffic picked up in Q4FY23 has sustained while Air cargo traffic increased,” it said. The agency also expects GDP growth in 2023-24 to be higher than RBI’s projection of 6.5 per cent 

The International Monetary Fund and S&P Global Market Intelligence have however projected India’s GDP growth this fiscal at 6.1 per cent as against 7.2 per cent last fiscal.