India’s economy expected to grow 7% in Q2, beating RBI’s estimate

The Indian economy is expected to grow by 7% in the second quarter, surpassing the central bank’s estimate of a 6.5% uptick, rating agency ICRA said on Tuesday, citing improved industrial performance despite a weak monsoon hitting the farm sector.

The Indian economy is expected to grow by 7% in the second quarter, surpassing the central bank’s estimate of a 6.5% uptick, rating agency ICRA said on Tuesday, citing improved industrial performance despite a weak monsoon hitting the farm sector.

India’s real GDP (Gross Domestic Product) and Gross Value Added (GVA) had grown 7.8% in the April to June 2023 quarter. ICRA expects the GVA growth to ease to 6.8% in the July to September quarter, with the services sector’s GVA expected to rise 8.2%, from 10.3% in Q1, and industry reflecting a 6.6% rise. Farm sector GVA growth is expected to slow to 1% from 3.5% in the first quarter.

“A normalising base and an erratic monsoon are expected to result in a sequential moderation in the GDP growth to 7.0% in Q2 from 7.8% in Q1,” ICRA chief economist Aditi Nayar said. “Regardless, we anticipate that the GDP expansion in this quarter will exceed the Monetary Policy Committee’s (MPC’s) October 2023 projection of 6.5%,” she added.

“Looking ahead, uneven rainfall, narrowing differentials with year-ago commodity prices, the possible slowdown in momentum of Government capex as we approach the Parliamentary Elections, weak external demand and the cumulative impact of monetary tightening are likely to translate into lower GDP growth in H2 FY2024. As a result, we maintain our 2023-24 GDP growth estimate at 6.0%, lower than the MPC’s projection of 6.5% for the fiscal.”