Economists in India are forecasting that the country’s real GDP growth for the first quarter will exceed the Reserve Bank of India’s (RBI) estimate of 8 percent. The State Bank of India (SBI) economists have projected growth at 8.3 percent, while the domestic rating agency Icra anticipates an even higher figure of 8.5 percent.
The RBI, which has predicted a GDP growth of 6.5 percent for the fiscal year 2023-24, estimated an 8 percent growth for the April-June period. Official growth data is set to be released later this month. In the previous March quarter, the real GDP had expanded by 6.1 percent compared to the same period in the previous year.
Both SBI and Icra attribute their expectations of accelerated economic growth to increased capital expenditure by the central and state governments. The rating agency also points to the lower base effect, as the GDP had contracted significantly in the first quarter of the fiscal year 2020-21.
SBI’s group chief economic adviser, Soumya Kanti Ghosh, mentioned that the bank tracked 30 high-frequency indicators to arrive at the estimated 8.3 percent growth. Ghosh highlighted a surge in capital expenditure during the first quarter, with the central government spending 27.8 percent of its budgeted amount, and states spending 12.7 percent of their budgeted allocations.
Elections are due in states like Andhra Pradesh, Telangana, and Madhya Pradesh, which have witnessed significant capital expenditure growth of up to 41 percent.
Both SBI and Icra emphasized the contributions of the services sector, which has sustained higher growth rates. They also noted improved profit margins in the corporate sector as a tailwind for growth prospects.
However, the two organizations diverged in their forecasts for the entire fiscal year. SBI projected a growth of 6.7 percent for FY24, while Icra forecasted a lower 6 percent, well below the RBI’s estimate. Icra’s chief economist, Aditi Nayar, highlighted potential headwinds in the second half of the fiscal year, including erratic rainfall, changes in commodity prices compared to the previous year, and a possible slowdown in government capital expenditure as the country approaches parliamentary elections.
In their estimates for the June quarter, SBI also noted the continued high credit growth and the ability of banks to maintain this momentum due to their lean balance sheets, which is expected to contribute positively to the growth process.
Sources By Agencies