PM Modi
According to a projection released on Tuesday by Icra Ratings, India’s economic growth would go up to 8.5% in the April–June quarter of the current fiscal year from the growth rate of 6.1% seen in the preceding January–March quarter. The rating organization attributed the quicker increase to a solid foundation as well as a rebound in the services industry.
The second half of the fiscal year is likely to see headwinds, which would prove to be a dampener, according to Icra’s chief economist Aditi Nayar, despite the fact that its projection is higher than the RBI’s prediction of 8.1%.
Nayar said erratic rainfall, narrowing differentials with year-ago commodity prices, and possible slowdown in momentum of government capex “as we approach the Parliamentary elections will limit the growth”, and maintained her 6 per cent real GDP growth estimate for FY24 which is lower than RBI’s 6.5 per cent.
In the first quarter, unseasonal heavy rains, lagged effect of the monetary tightening and weak external demand exerted a downward pressure on GDP growth, she said.
Factors like a continued catch-up in services demand and improved investment activity, particularly a welcome front-loading in government capital expenditure, and sharply lower prices of various commodities which expanded margins in some sectors boosted growth in the June quarter, she said.
The agency projected that the gross fixed capital formation (GFCF) expansion in Q1 FY24 to be in double digits, based on the robust year on year growth performance of a majority of the investment-related indicators.
The aggregate capital outlay and net lending of 23 state governments (except Arunachal Pradesh, Assam, Goa, Manipur and Meghalaya), and the government of India’s gross capital expenditure expanded by a sharp 76 per cent to Rs 1.2 lakh crore, and 59.1 per cent to Rs 2.8 lakh crore, respectively, in Q1 FY24, it added.
According to the report, capex-related external commercial borrowings for modernization, new projects, local purchases, and imports of capital goods increased to USD 13.0 billion in Q1, exceeding the USD 9.6 billion total for FY23.
It stated that 11 of the 14 high-frequency indicators related to the services sector showed increase during the quarter, raising the sector’s gross value added growth forecast for the first quarter of FY24 from 6.9% to 9.7%.
