The Indian economy is likely to have grown at 7 percent in the second quarter of the ongoing financial year, higher than the estimate of the Reserve Bank of India’s fixed rate panel, research firm ICRA said in a note on Tuesday.
ICRA said India’s GDP growth was likely to moderate to 7 percent in Q2 after growth of 7.8 percent in Q1, on a normalizing base and erratic monsoon.
“Looking ahead, uneven rainfall, narrowing of differences with year-ago commodity prices, the possible slowdown in government capital momentum as we approach the General Elections, weak external demand and the cumulative effect of monetary tightening are likely to translate into lower GDP growth in H2FY24 ,” said Aditi Nayar, Chief Economist, Head-Research & Outreach, ICRA.
“As a result, we maintain our FY2024 GDP growth estimate at 6.0%, lower than the MPC’s projection of 6.5% for the fiscal,” she added.
ICRA notes that investment activity in the country remained robust in the second quarter, with the annual growth of seven out of eleven investment-related indicators improving in Q2 compared to Q1.
“While the YoY growth in the remaining four indicators weakened in Q2 FY2024 relative to Q1, all of them witnessed double-digit expansion in the quarter, including the CV registrations (+13.5 percent), cement production (+10.2 percent), the capital expenditure and net lending by the states (+33.5 percent), and the capital of the Government of India (GoI) (+26.4 percent),” ICRA said in its note.
The Centre’s gross capital expenditure increased by 26.4 per cent year-on-year to Rs 2.1 lakh crore in Q2, down from Rs 2.8 lakh crore seen in Q1, data show.
Momentum in construction activity remained healthy in Q2, even as sub-par rainfall resulted in relatively lower disruptions in the quarter relative to what was typically seen in the past, ICRA said. “With a slowdown in national highway construction, the GVA growth of this sub-sector is likely to decline to 7.0% in Q2FY24 from 7.9% in Q1FY24,” the note said.