ICRA Projects India's Q4 GDP Growth to Ease to 6.7%

ICRA forecasts India's GDP growth to moderate to 6.7% in Q4 2024, with full-year growth at 7.8%, influenced by sectoral declines and government policies, but signs of economic resilience remain.

ICRA Forecasts India's GDP Growth

According to the rating agency ICRA Ltd, India's GDP growth is expected to moderate to a four-quarter low of 6.7% in the fourth quarter of 2024. However, for the full fiscal year, ICRA predicts GDP growth of 7.8%.

Factors Influencing GDP and GVA Growth

ICRA anticipates that gross value added (GVA) growth will ease to 5.7% in Q4, down from 6.5% in the previous quarter. This decline is attributed to lower industrial and services growth, with agricultural GVA expected to contract for the second consecutive quarter by 0.5%.

GVA is the value of goods and services produced in a country minus input costs.

GDP-GVA Divergence Analysis

The disparity between GDP and GVA growth rates in the previous quarter is attributed to reduced fertiliser subsidy disbursements. The government's revised budget estimates for FY24 increased the allocation for fertiliser subsidy, which is expected to mitigate the disparity.

Sectoral Analysis

ICRA forecasts that industrial GVA growth will moderate to 7.9% in Q4, led by declines in manufacturing, electricity, construction, and mining and quarrying. Slower growth in the Index of Industrial Production (IIP) suggests a decrease in manufacturing GVA.

Services GVA Expectations

Services GVA is projected to ease slightly to 6.2% in Q4 from 7% in Q3 due to deceleration in services exports. However, investment activities are expected to remain healthy.

Insights from ICRA's Chief Economist

Aditi Nayar, chief economist and head of research & outreach at ICRA, highlights factors affecting GVA growth in Q4. Despite challenges like unfavourable monsoon rains, signs of rural demand revival are emerging, while urban consumption remains robust but uneven.

Economic Performance in Previous Quarters

In the December quarter, India's economy surged ahead, with a surprise growth rate of 8.4%, driven by strong performances in manufacturing, electricity, and construction. GVA growth during the quarter stood at 6.5%. India reported GDP growth rates of 7.8% and 7.6% in the first two quarters of FY24.

Conclusion

ICRA's projections suggest a moderation in India's GDP growth for Q4 2024, influenced by various factors including sectoral performance and government policies. While challenges persist, signs of revival in certain sectors offer hope for economic resilience amidst evolving conditions.