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India’s second-quarter GDP growth estimated at 6.7% on strong services play

New Delhi: The Indian economy likely grew 6.7% in the July-September quarter, according to a median forecast of 10 economists polled by ET, boosted by a strong performance in the service sector.

THE Reserve Bank of India (RBI) forecasts growth of 6.5% for the quarter.

Robust manufacturing and construction activity likely also contributed to growth in the second quarter, economists say. Forecasts ranged between 6.2% and 7%. The economy grew by 7.8% in the April-June quarter and 6.2% in the July-September quarter of the previous fiscal year.

“We expect GDP growth to moderate sequentially to 7% in Q2FY24, partly on a less favorable basis, while still exceeding the MPC“the latest estimate of 6.5%,” said ICRA chief economist Aditi Nayar, giving the highest estimate in the survey.

Official national accounts data for the second quarter of the current financial year will be published at the end of November.

“The services sector is expected to drive growth in the second quarter, as evidenced by strong services results. PMI index and passenger numbers, while construction and manufacturing are also expected to perform well,” said Rajani Sinha, chief economist at CareEdge, forecasting 6.5 per cent growth in Q2FY24. S&P Global’s Services PMI averaged 61.1 in the July-September quarter. , accelerating from 60.6 in the previous three months, according to data released last month, indicating that services activity strengthened during the quarter. A PMI value above 50 denotes expansion.

“Services sector activity likely remained buoyant in the second quarter, apart from manufacturing sector growth, as signaled by stronger high-frequency numbers including PMIs, capacity utilization, growth in credit, infrastructure indices, etc.,” said Radhika Rao, senior economist at DBS.

Manufacturing activity The trend also accelerated in the second quarter of FY24 as companies reported better export demand despite a slowdown in global growth, according to the results of a FICCI survey released on Monday.

Increased government investment and domestic consumption also played a role in growth.

“India continues to outperform its global peers in terms of economic growth and in Q2FY24, despite multiple external headwinds, economic activity was supported by domestic consumption, investment from State and dynamic consumer confidence,” said Rahul Bajoria, Managing Director and Head of Emerging Markets Asia. ex-China), Barclays.

Experts say urban consumption likely did better than rural consumption, which saw some improvement during the quarter.

Consumer packaged goods in India grew 9% in value and 8.6% in volume in the September quarter from a year earlier, helped by higher spending in rural areas. India for essential and discretionary products, according to researcher NielsenIQ, ET reported on November 8.

He attributes this growth to slowing inflation, falling unemployment and falling LPG prices.

Outlook for FY24
While economists were more optimistic about Growth in the second quarter that the RBI’s Monetary Policy Committee (MPC), for FY 2024, they have a lower growth forecast of 6.3% compared to the central bank’s estimate of 6.5% in the last October 6 review.

Some have even revised their estimate downward for the whole year.

“For the full year (FY24), we have lowered our GDP growth forecast to 6.3% from 6.5% earlier due to the expected hit to Kharif agricultural production and its negative impact on rural demand,” said CareEdge’s Sinha.

Growth in subsequent quarters will depend on rising real wages and maintaining inflation risks, they said.

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