India’s GDP growth to ‘moderate’ in Q3; here’s what analysts expect

Economists and financial institutions have pegged the economic growth in the third quarter of the fiscal year in the range of 6-6.8%, moderating from the previous quarter's growth on factors ranging from a lower industrial sector to a slowdown in expenditure and uneven monsoon.

India's GDP in (October-December) Q3 FY24 is estimated to have grown at 6.8% on an unchanged base, although there are expectations that it could hit 7% on the back of likely revisions in the year-ago quarter (Q3 FY23) estimates.

"The CLI Index (a basket of 41 leading indicators which includes parameters from almost all the sectors) based on monthly data shows a slight moderation in economic activity in Q3," SBI Research says in its latest Ecowrap note.

After factoring in the "slight decline" in economic activity in Q3 FY24, it estimates that "GDP should grow in the range of 6.7-6.9% with a GVA growth of 6.6%".

Estimates by other economists also suggest the slow capex push, muted industrial growth and irregular weather might have triggered slow economic activity, which is likely to be in the range of 6-6.8% in Q3 FY24, lower than 7.6% in the year-ago period.

Though the likelihood of the global economy exhibiting stronger than expected growth in 2024 has brightened in recent months -- the IMF upgraded its global growth forecast to 3.1% in 2024 -- the UK and Japan slipping into recession and a marked slowdown in China could destabilise global economic order.

As a counter-narrative to the global gloom, says Soumya Kanti Ghosh, group chief economic adviser, SBI Research, that consumer confidence has strengthened further in India, driven chiefly by "optimism" about the general economic situation and job conditions. "Various enterprise surveys also point towards strong business optimism."

Ratings agency ICRA estimates India's economic growth in the third quarter at a moderate pace of 6% year-on-year sequentially. The GVA growth is estimated to ease to 6% in Q3 from 7.4% in Q2 of the fiscal year. “Lower volume growth for the industrial sector, flagging momentum in certain indicators of investment activity, a slowdown in government expenditure and an uneven monsoon are expected to dampen the GDP growth to 6.0% in Q3 FY2024 from 7.6% in Q2 FY2024,” says Aditi Nayar, chief economist, head-research & outreach, ICRA.

Both ICRA and SBI Research's economic growth projections are lower than the Reserve Bank of India's (RBI) earlier estimates of 6.5% in Q3 FY24. The government will release Q3 FY24 GDP growth data on February 29, 2024.

At 7.6%, India's GDP grew higher than the RBI monetary policy committee's forecast of 6.5% in the July-September quarter. Q2 GDP, however, was lower than the 7.8% growth in the year-ago quarter. The Reserve Bank of India in its bi-monthly MPC announcement this month said the real GDP in 2023-24 is expected to grow at 7.3%, higher than the 7.2% recorded in 2022-23. It expects the economy to grow by 7% in 2024-25.