India’s GDP Growth Is Likely To Stand At 7% In Q4: Economists

For the entire fiscal year, GDP growth is forecasted to reach 7.9 per cent. This projection also exceeds the government's second advance estimate of 7.6 per cent

Indian economic growth will maintain its trajectory in the fourth quarter of the fiscal year ending in March, albeit at a slower rate, according to economists surveyed by Bloomberg. Projections suggest that the gross domestic product is poised to expand by 7 per cent during the January-March period, compared to the 8.4 per cent growth recorded in the preceding quarter. Additionally, gross value added is expected to rise by 6.3 per cent.

For the entire fiscal year, GDP growth is forecasted to reach 7.9 per cent, surpassing the 7 per cent growth recorded in FY23. This projection also exceeds the government's second advance estimate of 7.6 per cent. GDP numbers are scheduled to be released on Friday at 5:30 pm.

In addition, in its annual report released on Thursday, the Reserve Bank of India forecasted a growth rate of 7 per cent for the Indian economy in the ongoing fiscal year starting from April. The report emphasised the robust growth momentum of the Indian economy during the 2023-24 financial year (April 2023 to March 2024), with real GDP expanding by 7.6 per cent, up from 7.0 per cent in the previous year. 

The upcoming quarterly growth rate is likely to be lower than the previous quarter's exceptional 8.4 per cent expansion, driven by temporary factors. However, it is anticipated that the growth rate for the last quarter will still surpass the government's forecast of 5.9 per cent.

“The Indian economy has exhibited remarkable resilience despite higher-rates-for-longer, Russia-Ukraine war and Covid prior to that,” Kaushik Das, chief economist for India at Deutsche Bank AG, wrote in a note, reported Bloomberg. 

He also noted that the calculation methodology may significantly influence the robust growth rate.

According to Teresa John, an economist at Nirmal Bang Institutional Equities, India's growth trajectory will remain robust regardless of which party is in power after June. She suggests that the overall policy direction could remain, providing a sense of stability and predictability for the audience.

Teresa John, an economist at Nirmal Bang Institutional Equities, said India's growth will stay robust no matter which party forms the government in June. There may not be “any significant change in the broad direction of policy irrespective of political party,” she said.

Stronger growth means the Reserve Bank of India will have reason to keep interest rates unchanged for longer, given that inflation is still above its 4% target and the US Federal Reserve has delayed its policy easing. Economists, including from Goldman Sachs Group Inc., have pushed back their rate-cut forecasts for India to later this year as the US keeps rates higher for longer.

According to Teresa John, an economist at Nirmal Bang Institutional Equities, India's growth will continue to be strong regardless of the party that formed the government in June. "Any significant change in the broad direction of policy irrespective of political party" might not occur, according to her, as per the report.

Given that the US Federal Reserve has postponed its policy easing and that inflation is still above its 4 per cent target, stronger growth will justify the Reserve Bank of India to maintain interest rates for an extended period. Due to the US maintaining higher interest rates for longer, economists, including those at Goldman Sachs Group Inc., have rescheduled their rate-cut predictions for India for later this year, according to the report.