Economists forecast India’s Q1 FY24 real GDP growth to surpass RBI’s 8% estimate. SBI, India’s largest lender, projects 8.3% economic growth for the quarter ending June 2023. They anticipate a higher overall growth rate of 6.5% for FY24.
The real GDP of the nation increased by 6.1% in the quarter that concluded in March 2023, marking a noteworthy surge from the corresponding period the previous year.
This robust growth can be attributed to the unexpectedly accelerated pace of expansion experienced in the fourth quarter of 2022. This was driven by a substantial increase in domestic investment, leading the International Monetary Fund (IMF) to revise its earlier growth projection for India in 2023. The revised forecast now stands at 6.1%, reflecting an increase of 0.2 percentage points from the previous estimate.
Despite encountering challenges, experts from the State Bank of India (SBI) identified the services sector as the principal catalyst for the global economy in the fourth quarter of FY23. This observation underscores the sector’s resilience and ability to maintain its pivotal role even amid adverse circumstances.
Soumya Kanti Ghosh, SBI’s Group Chief Economic Adviser, analyzed 30 high-frequency indicators to determine the 8.3% estimate. “In Q1FY24, Manufacturing is sustained as reflected in better IIP, automobile sales, PMI data etc. Further, agriculture sales has been strong and power supply has been high. On the services side, passenger traffic picked up in Q4FY23 has sustained while Air cargo traffic increased,” she wrote in a note.
Most notably, capital expenditures surged in Q1. The Central government allocated 27.8% of the projected amount, while the states contributed 12.7%.
States such as Andhra Pradesh, Telangana, and Madhya Pradesh reported capital expenditure growth of up to 41%.
Additionally, it was observed that Indian Inc. achieved around 3% top-line growth in Q1FY24. This was supported by EBITDA and PAT, which expanded by over 30% in comparison to Q1FY23. Industries such as Banks, Auto, IT, Pharma, FMCG, Refineries, etc., played a significant role in contributing to this growth.
As per the SBI study, credit growth in the banking sector has expanded across industries and sustained double-digit growth.
“Despite rising interest rates, the overall economic growth led to higher credit demand leading to banks reporting a robust rise in advances. Both the PSBs and private sector banks logged in an equal pace of loan growth during Q1FY24,” it stated.
It thinks Indian banks, particularly PSBs, are in good financial shape and well-positioned to withstand any macroeconomic shock.
