Informist Poll
India Apr-Jun GDP growth seen at five-quarter low of 6.9%
This story was originally published at 20:54 IST on 27 August 2024
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By Shubham Rana
NEW DELHI – India's GDP growth is likely to have moderated to a five-quarter low of 6.9% in Apr-Jun, mainly because of a slowdown in government spending due to the general election, according to the median of estimates of 21 economists polled by Informist.
The Indian economy grew 7.8% a quarter ago and 8.2% a year ago. The National Statistical Office is scheduled to release GDP data for Apr-Jun on Friday.
The Indian economy has grown faster than expectations over the last year, expanding 8.2% in 2023-24 (Apr-Mar). Growth last year was led primarily by government-led capital expenditure. But with government spending limited due to the Model Code of Conduct imposed during Apr-Jun, GDP growth is likely to have declined, economists said.
In fact, the Reserve Bank of India earlier this month lowered its GDP growth forecast for Apr-Jun by 10 basis points to 7.1%, citing lower than expected general government expenditure and corporate profitability. The Centre’s total expenditure declined 7.7% on year in Apr-Jun, while capital spending slumped 35.0%.
The slowdown in capital expenditure by the government also weighed on the financial performance of manufacturing companies. "The indicators of corporate performance in Apr-Jun point to moderation in sales growth of manufacturing companies in both nominal and real terms, although excluding the petroleum sector, a better outturn emerges," Soumya Kanti Ghosh, group chief economic adviser, State Bank of India, said in a report. "Profit margins (of manufacturing companies) have declined and this will pull down manufacturing growth," Ghosh noted.
Other high frequency indicators, however, showed improved manufacturing activity in Apr-Jun. The manufacturing Purchasing Managers’ Index averaged 58.2 in Apr-Jun, higher than 57.5 in the previous quarter. Growth in industrial output, as measured by the Index of Industrial Production, was 5.2% in Apr-Jun, compared with 5.1% in Jan-Mar. Merchandise exports, too, rose 6.0% on year in Apr-Jun.
"An upturn in rural consumption along with higher demand for energy in Apr-Jun should mitigate the muted government spending," ICICI Bank said in a research report. High frequency indicators such as two-wheeler sales, which grew 20% in Apr-Jun, reflect an improvement in rural consumption, economists said.
Even as rural consumption is expected to have improved in the first quarter of 2024-25, agricultural growth is only seen picking up from Jul-Sep, economists said. "The agriculture sector will feel the pinch of lower reservoir level from last year’s poor monsoon and heatwaves affecting productivity," Sarbartho Mukherjee, senior economist at CareEdge Ratings, said.
The service sector growth is also expected to have moderated in Apr-Jun, from 6.7% in Jan-Mar, economists said. The services Purchasing Managers' Index averaged 60.5 in Apr-Jun, lower than 61.2 in Jan-Mar.
While GDP growth in Apr-Jun is projected to moderate from the previous quarter, economists expect the growth in the overall gross value added to rise 6.4% from a four-quarter low of 6.3% in Jan-Mar.
There was a huge difference between GDP growth and gross value added growth in the second half of 2023-24. India's GDP grew 7.8% in Jan-Mar, while GVA growth lagged well behind at 6.3%. This wedge between GDP growth and GVA growth was because of a rise in net taxes. Net taxes, the difference between indirect taxes and subsidies, rose 22.2% on year in Jan-Mar and 19.1% in 2023-24. This was because of higher tax collections and lower subsidy payouts.
The wedge between GDP growth and GVA growth is expected to have moderated in Apr-Jun, economists said. "This (the fall in GDP-GVA gap) is on account of an expected lower expansion in the net indirect taxes in Apr-Jun owing to a turnaround in the subsidy outgo of the government," ratings agency ICRA said in a note.
The government's expenditure on major subsidies in Apr-Jun rose 3.6% on year compared to a 24.2% on-year fall in Jan-Mar.
Summary of the Informist poll on GDP growth in Apr-Jun:
Range of expectations: 6.0-7.5%
Mean: 6.8%
Median: 6.9%
Mode: 7.1%
The following table details GDP growth estimates by poll respondents for Apr-Jun, in ascending order, and estimates for GVA growth:
|
ORGANISATION |
GDP growth estimate |
GVA growth estimate |
|
ICRA |
6.0% |
5.7% |
|
Nirmal Bang Institutional Equities |
6.2% |
6.0% |
|
QuantEco Research |
6.4% |
5.9% |
|
YES Bank |
6.4% |
5.9% |
|
IDFC FIRST Bank |
6.5% |
-- |
|
Goldman Sachs |
6.6% |
-- |
|
HDFC Bank |
6.6% |
6.2% |
|
Union Bank of India |
6.7% |
5.8% |
|
RBL Bank |
6.8% |
6.5% |
|
CareEdge Ratings |
6.9% |
6.6% |
|
ICICI Securities Primary Dealership |
6.9% |
6.8% |
|
Deutsche Bank |
7.0% |
-- |
|
ICICI Bank |
7.0% |
-- |
|
Societe Generale |
7.0% |
-- |
|
Barclays |
7.1% |
5.9% |
|
State Bank of India |
7.0-7.1% |
6.7-6.8% |
|
STCI Primary Dealer |
7.1% |
6.7% |
|
Bank of Baroda |
7.3% |
6.8% |
|
Capital Economics |
7.3% |
-- |
|
Moody's Analytics |
7.4% |
-- |
|
India Ratings and Research |
7.5% |
7.0% |
End
Edited by Rajeev Pai
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