A day after ratings agency ICRA said India's growth rate in the second quarter of the fiscal year will moderate to 7%, another prominent organisation SBI Research has also released a report, saying its in-house developed ANN model with "30 high-frequency indicators" shows the quarterly GDP growth for the Q2 FY24 should be in the range of 6.9%-7.1%, which will "firmly" push the FY24 growth rate over the RBI projections of 6.5%. This will also reaffirm SBI Research's full-year GDP forecast of 6.7%.

Domestically, growth indicators point towards a steady uptick. "Domestic economic activity in Q2 has been supported by robust agricultural performance, sustained buoyancy in services, strong capital expenditure by the centre (49% of budgeted) and states (32% of budgeted) and a robust pick up in consumption expenditure," says the report.

However, concerns about global growth remain. The U.S. economy is seen headed for a slowdown as consumers wind up excess savings worth around $1 trillion. SBI says a "frontloaded slowdown" looks more imminent as the U.S. elections are due in November 2024 and thus the Democrats may not like a slowing economy before polls.

All this means is export competitiveness could hit a temporary roadblock, with a palpable slowdown of major economies globally. The net exports contribution to nominal GDP is likely to come positive and increase in Q2 FY24 compared to Q1 FY24, possibly around 2%, according the SBI Research.

In Q2 FY24, shows the data, the goods trade deficit increased to $60 billion, while the services trade surplus improved to $40 billion, leading to a net export deficit of goods and services at $20 billion. In YoY terms, this is 55% higher than net exports in Q2 FY23 (deficit of $44 billion).

Additionally, Indian Inc. has shown continuing momentum in Q2 FY24 after a 30% growth in PAT in Q1 FY24. In Q2, though India Inc reported a top-line growth of 4%, its EBIDTA and PAT growth came out to be at 66% and 31%, respectively, as compared to Q2 FY23, chiefly contributed by banks, auto, capital goods, cement, electronics, power generation, realty, FMCG, etc. "Corporate results have been strong across the universe."

Ratings agency ICRA on Tuesday also projected the growth to moderate in the second quarter to 7% on a year-on-year basis from 7.8% growth in the first quarter. The GVA growth is estimated to ease to 6.8% in the previous quarter from 7.8% in the first quarter of the fiscal year.

The current projections by ICRA and SBI Research are above the RBI’s forecast of 6.5% GDP growth in the second quarter. “A normalising base and an erratic monsoon are expected to result in a sequential moderation in the GDP growth to 7.0% in Q2 FY2024 from 7.8% in Q1 FY2024. Regardless, we anticipate that the GDP expansion in this quarter will exceed the Monetary Policy Committee’s (MPC’s) October 2023 projection of 6.5%,” says Aditi Nayar, chief economist, head-research & outreach, ICRA.

The Union finance ministry, in its monthly economic review for October 2023 released on Tuesday, said India’s growth experience in FY24 should continue to be a positive outlier as compared to other major economies. "In the medium-term, thanks to the sustained focus on public investment in infrastructure and advances in digital public infrastructure, India can look ahead to the prospect of a longer economic and financial cycle than in the past, subject to global factors."

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