Icra Estimates GDP Growth For Q1FY24 at 8.5%, Projects 6% Growth For FY24

Irregular rainfall, a potential dip in government spending momentum, and narrowing differentials with year-ago commodity prices could limit growth in the latter half of the current fiscal year (FY24).

India could witness accelerated economic growth in the first quarter of the current fiscal year, stated Icra Ratings in it’s report on Tuesday. The agency noted that the April-June quarter economic growth could be estimated at around 8.5 per cent compared to the 6.1 per cent growth witnessed in the previous January-March quarter. 

According to a PTI report, the agency credited the growth to a recovery in the services sector. Icra’s growth estimate is above the 8.1 per cent growth forecast given by the Reserve Bank of India (RBI), however, the agency’s chief economist Aditi Nayar noted that the growth in the second half of the fiscal could slow down. 

Nayar stated that irregular rainfall, a potential dip in government spending momentum, and narrowing differentials with year-ago commodity prices could limit growth in the latter half of the current fiscal year (FY24). Citing these reasons, the economist predicted a GDP growth rate of 6 per cent for FY24, lower than the RBI forecast of 6.5 per cent. 

The report further noted that erratic rains, and weak external demand among other factors could dampen the GDP growth. Notably, Nayar stated that improved investment activity, specifically the government’s boost to capex, and drastically lowered prices of commodities expanded margins in some sectors, in turn contributing to the enhanced growth in the June quarter. 

Icra estimated the gross fixed capital formation (GFCF) expansion in the first quarter of the current fiscal year to be in double digits, on account of the strong growth performance of a majority of investment-related indicators, on a year-on-year (YoY) basis. The report noted that the aggregate capital outlay and net lending of 23 state governments (excluding Arunachal Pradesh, Assam, Goa, Manipur, and Meghalaya) increased by a steep 76 per cent to Rs 1.2 lakh crore in the first quarter of the current fiscal year. While the central government’s gross capex grew 59.1 per cent to Rs 2.8 lakh crore in Q1FY24.

Elaborating on the growth in the services sector, the agency noted that services’ gross value growth increased to 9.7 per cent in the first quarter, compared to 6.9 per cent in the preceding quarter. 

Notably, electricity generation growth fell to an 11-quarter low of 1.3 per cent in the first quarter of the current fiscal year, due to the unfavourable base and the additional rainfall in the early half of the quarter.