India Quarterly GDP Growth was 8.5% Up from 6.1% in Prior Quarter

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ICRA Ratings reports India’s economic growth will accelerate to 8.5% in the April-June period of the current fiscal from the 6.1% growth rate witnessed in the preceding January-March quarter.

ICRA has projected the year-on-year (YoY) growth of the GDP to improve to 8.5% in Q1 FY2024 from 6.1% in Q4 FY2023, boosted by the supportive base of Q1 FY2023, which saw the Indian economy normalizing after the Covid19 pandemic. The GVA growth is seen at 8.1% in Q1 FY2024 (+6.5% in Q4 FY2023), driven by the recovery in the services sector (+9.7% vs. +6.9%), even as improved margins are likely to have shielded the industry (+7.3% vs. +6.3%) from weak external demand, with a relatively lower growth foreseen in agriculture (+4.0% vs. +5.5%).

ICRA projects the GFCF expansion (Gross Fixed Capital Formation is a measure of national investment) in Q1 FY2024 in double digits, based on the robust YoY growth performance of a majority of the investment-related indicators. For instance, the aggregate capital outlay and net lending of 23 state governments (except Arunachal Pradesh, Assam, Goa, Manipur and Meghalaya), and the Government of India’s (GoI’s) gross capital expenditure expanded by a sharp 76% to Rs. 1.2 trillion and 59.1% to Rs. 2.8 trillion, respectively, in Q1 FY2024.

Additionally, capex-related ECB (External Commercial Borrowing) flows (for the purpose of modernization, new projects, and local purchase and imports of capital goods) jumped to $13.0 billion in Q1 FY2024, exceeding the full-year FY2023 levels ($9.6 billion). Boosted by housing construction projects under the Ministry of Housing and Urban Affairs, the value of project completions touched a record high of Rs. 7.8 trillion in Q1 FY2024 (Source: Centre for Monitoring Indian Economy, Aug 20, 2023), surpassing the record high of Rs. 6.5 trillion in FY2017.

ICRA estimates the services GVA YoY (Gross Value Added) growth to have risen to ~9.7% in Q1 FY2024 from 6.9% in Q4 FY2023. As many as 11 of the 14 high-frequency indicators pertaining to the services sector recorded a YoY growth in Q1 FY2024, with the pace of expansion ranging from 0.3% (telephone subscribers) to 18.6% (domestic airlines passenger traffic). In contrast, indicators such as CV sales (-3.3%) and air cargo traffic (-0.4%) saw a mild YoY contraction in Q1 FY2024.

ICRA estimates the industrial GVA growth to have risen to 7.3% in Q1 FY2024 from 6.3% in Q4 FY2023, boosted by the manufacturing sector. Manufacturing GVA growth is foreseen at 8.0% in Q1 FY2024, benefitting from the uptick in volumes and the expansion in margins across several sectors owing to lower commodity prices. Notwithstanding the excess rainfall in some regions of the country in Apr-May 2023, most indicators pertaining to construction activity witnessed an improvement in Q1 FY2024, suggesting a robust GVA growth of 9.0% for this sub-sector. However, the YoY growth in electricity generation dipped to an 11-quarter low of 1.3% in Q1 FY2024, owing to an unfavourable base as well as the excess rainfall seen in the first half of the quarter.

About ICRA Limited:
ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency. Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency Moody’s Investors Service is ICRA’s largest shareholder.

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