India Apr-Jun GDP growth seen at 4-quarter high of 7.8%
Informist, Thursday, Aug 24, 2023
By Priyansh Verma and Shubham Rana
NEW DELHI – India's economy is likely to have expanded 7.8% in Apr-Jun, the most in four quarters, as robust domestic demand propelled growth in services activity, according to a poll of 22 economists by Informist.
India's GDP had grown 13.1% in Apr-Jun 2022, 6.1% in Jan-Mar, and 7.2% in the year ended March.
The National Statistical Office is scheduled to release GDP data for the June quarter at 1730 IST on Aug 31.
Growth in gross value added, or GVA, is seen in the range of 7.0-7.8% in Apr-Jun, according to respondents in the poll.
At the projected 7.8%, GDP growth in Apr-Jun would be 20 basis points lower than the Reserve Bank of India's projection for the quarter.
"We think robust domestic demand is anchoring economic growth, with strong momentum in areas such as construction, underpinned by government capital expenditure," Barclays said in a report.
"In terms of the sectoral breakdown, we expect services to continue to be the largest contributor to growth, driven by robust activity levels in the financial services, trade, hotels and transport sectors," it said.
For Apr-Jun, the services Purchasing Managers' Index averaged 60.6, higher than 58.1 in the preceding quarter. In Apr-Jun 2022, services PMI had averaged 58.7.
Services exports in the June quarter, however, fell to $80.76 bln from $85.83 bln in Jan-Mar, but rose 6.1% from Apr-Jun 2022.
Higher government capex is also likely to have boosted economic activity in Apr-Jun. The Union government's capital expenditure in Apr-Jun jumped 59.1% year-on-year to 2.785 trln rupees, driving construction activity. States, too, recorded a sharp increase in capital spending during the quarter.
Data analysed from the Comptroller and Auditor General of India showed that 23 states together spent 1.05 trln rupees in the first quarter of 2023-24, up 75.7% year-on-year.
"Government investments from both Centre and states have expanded at a fast pace and credit growth is quite healthy," said Dharmakirti Joshi, chief economist, CRISIL.
That said, manufacturing activity is likely to have witnessed weaker momentum in Apr-Jun, which bore the brunt of a global slowdown. The year-on-year growth in the Index of Industrial Production eased to 4.5% in Apr-Jun from 4.6% in Jan-Mar, but India's manufacturing PMI averaged 57.9 in Apr-Jun, higher than 55.7 in Jan-Mar.
"Manufacturing gross value added growth is expected to continue in Apr-Jun, with profit growth (of manufacturing firms) supported by a reduction in input cost pressure, which balanced slowdown in sales growth," said Gaura Sen Gupta, economist, IDFC FIRST Bank.
Meanwhile, economists expect agriculture GVA growth to be in the range of 2.5-3% in Apr-Jun, the least in at least three quarters, due to a patchy monsoon.
"Agriculture might prove to be somewhat of a drag even with a sowing activity completed slightly above last year (by 0.1%) and a patchy monsoon so far," said Aditya Vyas, economist, STCI Primary Dealer Limited. As on Aug 18, the area under kharif crops across the country in the 2023-24 (Jul-Jun) season was at 102.3 mln ha, compared with 102.1 mln ha a year ago.
Since Jun 1, the country has received 597.8 mm of rain, 7?low the normal weighted average of 643.0 mm for the period.
Following are the estimates of respondents on GDP growth in Apr-Jun:
