Indian Economy Likely Grew At 6.7 Per Cent In July-September Quarter Of FY24, Surpassing RBI's Forecast: Report

The Indian economy is expected to have expanded by 6.7 per cent in the July-September quarter, driven largely by a robust performance in the services sector, according to a median forecast of 10 economists polled by The Economic Times.

The Reserve Bank of India (RBI) has projected a growth rate of 6.5 per cent for the July-September quarter.

Economists also attribute the growth in the second quarter to strong manufacturing and construction activities.

Predictions varied between 6.2 per cent and 7 per cent.

The economy had expanded by 7.8 per cent in the April-June quarter and 6.2 per cent in the July-September quarter of the previous fiscal year.

"We expect GDP growth to moderate sequentially to 7 per cent in the second quarter of FY24, partly on a less supportive br, while exceeding the MPC's last estimate of 6.5 per cent," said ICRA chief economist Aditi Nayar, giving the highest estimate in the survey, ET reported.

The official data on national accounts for the current fiscal's second quarter is scheduled for release at November's end.

Estimating a 6.5 per cent growth for Q2 of FY24, Rajani Sinha, chief economist, CareEdge, said that the services sector is likely to drive growth in Q2 as reflected in strong services PMI and passenger traffic numbers while construction and manufacturing are also expected to put up a good show.

The Services PMI from S&P Global averaged 61.1 during the July-September quarter, an increase from 60.6 in the previous three months, according to data released last month. This suggests a strengthening in services activity during the quarter, with a PMI value above 50 signifying expansion.

"Service sector activity likely stayed buoyant in 2Q, besides manufacturing growth, as signalled by stronger high-frequency prints including PMIs, capacity utilisation, credit growth, infrastructure indices etc," Radhika Rao, senior economist at DBS, was quoted as saying in the ET report.

In the second quarter of FY24, manufacturing activity accelerated, with firms experiencing improved export demand even amidst a global growth slowdown, as per the findings of a FICCI survey released on Monday.

Increased investments by state governments and domestic consumption also played a significant role in fueling this growth.

According to Rahul Bajoria, MD and head of EM Asia Economics at Barclays, India continues to outperform its global peers on economic growth, and in Q2FY24, despite the multiple external headwinds, economic activity was underpinned by domestic consumption, state investment, and buoyant consumer sentiment.

Experts argue that urban consumption has likely outperformed rural consumption, which also saw some improvement during the quarter.

According to researcher NielsenIQ, India's packaged consumer goods experienced a 9 per cent growth in value and an 8.6 per cent increase in volume during the September quarter compared to the previous year, bolstered by increased spending in rural India on both essential and discretionary items.

This growth was attributed to easing inflation, a reduction in unemployment rates, and decreased LPG prices.

However, the outlook for FY24 is slightly cautious, with economists predicting a 6.3 per cent growth, marginally lower than the RBI's estimate of 6.5 per cent.

Some have even reduced their estimates for the entire year.

"For the full year (FY24), we have lowered our GDP growth projection to 6.3 per cent from 6.5 per cent earlier due to the expected hit to Kharif agriculture production and its negative impact on rural demand," said Sinha from CareEdge.

The economists noted that growth in the upcoming quarters would hinge on actual wage growth and the containment of inflation risks.