Economists see tepid H2 growth impacting FY24 GDP despite higher estimates

The first advance estimates pegs India’s real GDP growth at 7.3% in FY24. (PTI)

The first advance estimates pegs India’s real GDP growth at 7.3% in FY24, which is even higher than 7.2% in FY23. However, the second half growth projections do raise some points of concern, especially worries about sluggish growth in a scenario where inflation is stabilising.

Aditi Nayar, Chief Economist, Head – Research and Outreach, ICRA pointed out that, “Surprisingly, the estimated GVA growth of 6.9% for FY2024 implies that growth in this metric has been assumed at 6.2% in H2, significantly lower than the imputed GDP number for this period. In our view, the growth assumed for H2 FY2024 is quite high, given the tepid outlook for agriculture amidst the weak Kharif output and ongoing lag in Rabi sowing, as well as the feared temporary slowdown in capex ahead of the General Elections.” Adding that even the capex declined by 8.8% YoY during October-November 2023 after rising by 43.1% in H1 FY2024, they believe that “agri and construction GVA growth for H2 FY2024 is likely to print lower than that estimated by the NSO. Besides, we also believe that the growth estimated for the services sector for H2 FY2024 is on the higher side.”

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JM Financial’s Hitesh Suvarna added that “Government consumption is expected to remain weak while investments pick up in H2. Private consumption continues to be a cause of concern even though there are early signs of improvement in rural consumption. We build-in realistic growth expectations in the range of 6.7% to 6.9% for the upcoming fiscal. NSO’s Lower nominal GDP expectation adds upside risk to the government’s Fiscal Deficit target of 5.9% calling for spending curtailment to the extent of Rs 37000 crore.”

According to him, “Although slowing consumption is a cause of concern, however early signs of pick up in rural consumption, improving trade balance should cushion the economy going forward. We build in a more realistic GDP growth expectation of 6.7% to 6.9% in the upcoming fiscal.”