India's GDP Growth Moderates To 6.7% In Q4 FY24 Forecast

India Ratings and Research (Ind-RA) has projected a moderation in the country's GDP growth rate for the fourth quarter of the fiscal year 2023-24, with an expected rate of 6.7%.

However, despite this slight deceleration, the overall outlook for the fiscal year remains positive, with a forecast of approximately 6.9-7% growth.

Principal Economist Sunil Kumar Sinha, in an interview with PTI Videos, highlighted the factors contributing to the moderation in GDP growth. While the growth rate in the first two quarters benefited from a low base effect, the unexpected 8.4% expansion in the third quarter posed a surprise. Sinha emphasised that a significant portion of this growth was fueled by higher tax collections, a phenomenon unlikely to be repeated in the final quarter.

The data analysis indicates a disparity between GDP growth rates and Gross Value Added (GVA). The GDP climbed to 8.4% in the third quarter despite the GVA growing by 6.5%, mostly as a result of higher tax revenue. Sinha issued a warning, stating that it is unlikely that the GDP and GVA growth rates would diverge in the upcoming quarter.

The Reserve Bank of India (RBI), in its April monetary policy review, projected GDP growth for the fiscal year 2023-24 at 7%, reflecting confidence in the country's economic trajectory. Sinha echoed this sentiment, stating that GDP is expected to expand by 7.1% in the current fiscal year.

Sinha is upbeat about India's economic prospects despite the predicted slowdown in GDP growth, crediting strong growth indicators for the country's sustained pace in the first and second quarters. He anticipates that this trend will continue until FY25, however it will vary by sector.

Sinha highlighted the services sector as a key driver of economic growth, particularly construction and electricity. However, he cautioned that sectors such as mining and industrial output might lag behind.

The prediction of an above-normal monsoon by the Indian Meteorological Department bodes well for rural demand, potentially spurring consumption and broadening the economic recovery. This shift towards a more balanced consumption pattern would be welcome, given the current skewed distribution.

In its monthly economic review, the Finance Ministry underscored India's promising economic performance, citing resilient growth, robust economic activity indicators, price stability, and steady external sector performance. Despite global uncertainties, India continues to be the fastest-growing major economy, garnering positive assessments from international organisations and the RBI.

The release of GDP numbers for the fourth quarter and provisional estimates for the entire fiscal year on May 31 will provide crucial insights into the trajectory of India's economic recovery. While some moderation is expected in the short term, the overall outlook remains optimistic, supported by favourable domestic factors and promising growth indicators.

India remains on track to sustain its economic momentum, with a strong foundation for growth in the coming fiscal year. Despite challenges, the country's resilience and positive growth trajectory position it favourably on the global stage.

PTI Inputs