The Indian economy likely grew at 7 per cent in the second quarter of the ongoing financial year, higher than the Reserve Bank of India’s rate-setting panel’s estimation, research firm ICRA said in a note on Tuesday.
ICRA said India’s GDP growth likely moderated to 7 per cent in Q2 after growing 7.8 per cent in Q1, on a normalising base and erratic monsoon.
“Looking ahead, uneven rainfall, narrowing differentials with year-ago commodity prices, the possible slowdown in momentum of government capex as we approach the Parliamentary Elections, weak external demand and the cumulative impact of monetary tightening are likely to translate into lower GDP growth in H2FY24,” Aditi Nayar, Chief Economist, Head-Research & Outreach, ICRA, said.
“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 year-on-year growth of seven out of eleven investment-related indicators improving in Q2 as compared to Q1.
“While the YoY growth in the remaining four indicators weakened in Q2 FY2024 relative to Q1, all of them witnessed a double-digit expansion in the quarter, including the CV registrations (+13.5 per cent), cement production (+10.2 per cent), the states’ capital outlay and net lending (+33.5 per cent), and the Government of India’s (GoI’s) capex (+26.4 per cent),” ICRA said in its note.
The Centre’s gross capital expenditure increased by 26.4 per cent on an annual basis to Rs 2.1 lakh crore in Q2, lower than Rs 2.8 lakh crore seen in Q1, data shows.
Momentum in the construction activity remained healthy in Q2, even as sub-par rainfall resulted in relatively lower disruptions in the quarter vis-à-vis 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 have eased to 7.0% in Q2FY24 from 7.9% in Q1FY24,” the note said.
