GDP Growth Likely At 4.6% In December Quarter, Say SBI Economists

Economists at the State Bank of India have projected a GDP growth of 4.6% for the December quarter, citing that as many as 30 high frequency indicators are not as robust as they were in the previous quarters.

However, the projection is higher than the Reserve Bank of India's forecast of 4.4% for the third quarter of this fiscal.

The lower forecast also stems from poor corporate results, ex-BFSI, which have shown that operating profits grew at a much slower 9% in the third quarter, which is just half of 18% recorded in the year-ago period.

Also, despite a 15% in net sales, the bottom line was down by around 16%, Soumya Kanti Ghosh, the group chief economic adviser at SBI, said in a report on Tuesday.

Ghosh said he expects an upward revision in growth to 7% for the full fiscal, up from 6.8% projected earlier.

This is because the government is anticipated to revise the GDP numbers for FY20, FY21 and FY22 on Feb. 28. Additionally, there will be revisions in quarterly numbers of FY20, FY21, FY22 and even for the Q1 and Q2 of FY23, he said.

According to the report, corporate margin seems to be under pressure as reflected in results of around 3,000 listed companies, excluding financial services companies, due to higher input costs with decreasing margins.

Margins declined from 15.3% in Q3 FY22 to 11.9% in Q3 FY23, and this could pull down manufacturing growth in Q3, he said.

Meanwhile, India Ratings in a report said it expects GDP to grow 5.9% in FY24, lower than most other forecasts.

Although there are a few positives for growth such as sustained government capex, deleveraged corporates, low NPAs, production-linked incentive scheme and likely coiling in global commodity prices, they are still not sufficient to take the GDP growth beyond 6% in FY24, it added.

Another reason is the falling merchandise exports due to the global slowdown and merchandise imports not moderating proportionately, Sunil Kumar Sinha, the principal economist at the agency, said.

The report noted that industrial growth is expected to remain tepid because of the K-shaped recovery, which is neither allowing consumption demand to become broad-based nor helping the wage growth especially of the population belonging to the lower half of the income pyramid.

The industrial sector is projected to grow 3.9% in FY24 down from 4.1%. Services, the largest component of the GDP, on the other hand, is estimated to grow 7.3% compared to 9.1% in FY23.