As the surprise of India's third quarter gross domestic product (GDP) numbers settles, it has raked in consensus on securing the fifth-largest economy a growth rate upgrade as it continues to maintain its spot as the fastest-growing G-20 economy.
Notwithstanding climate change, global growth slowdowns, temperamental commodity prices and a slow pace of urban consumption, India maintains a robust economic momentum, according to economists.
On the back of strong GDP estimates, Moody's was among the first to revise its India growth estimate to 6.8% from 6.1%. This prompts the question of how many others will follow suit, tweaking their India growth projections.
"India's economy has performed well and stronger-than-expected data in 2023 has caused us to raise our 2024 growth estimate... India is likely to remain the fastest-growing among G-20 economies over our forecast horizon," Moody's noted in its Global Macro Outlook 2024ā25 for G-20 countries.
Despite muted private industrial capital spending, Moody's expects ongoing supply chain diversification benefits and investors' interest in the government's Production-Linked Incentive (PLI) scheme would boost targeted manufacturing.
Making the case for India's growth rate upgrade after last week's release from MoSPI, India's Chief Economic Advisor Anantha Nageswaran noted,
"...we believe that given the prospects of normal monsoons, good rabi sowing, prospects for rural income growth, a pick-up in manufacturing and mining sector growth, and a pick-up in bank credit growth that has been unfoldingāthe Indian economy ticks many boxes in the right way, continuing to grow at around 7%," Nageswaran told the media.
Jeremy Zook, director of sovereign ratings at Fitch Ratings, stated that the agency would look to positively revise growth forecasts for FY24 and FY25.
"Given the strong positive surprise to Q3 FY24, we will be revising upward our real GDP growth forecasts for FY24 and FY25 during our next quarterly global forecasting round," Zook told NDTV Profit.
Even though private consumption growth has remained modest, he continued, the government's ongoing capex drive would support robust investment as the main driver of near-term growth.
"India's economic momentum clearly remains incredibly robust, especially compared to global peers, and we expect this strong performance to persist over the next couple years," Zook cautioned. "Although the divergence between GDP and GVA growth indicates the GDP number could be slightly overstated."
Economically, GDP is GVA plus net indirect taxes or indirect taxes post-subsidy. The net indirect taxes grew by 32% year-on-year, creating a large GDP-GVA growth gap seen in the third quarter numbers.
Manufacturing, construction, and agriculture were primarily responsible for the slowdown in GVA growth. The manufacturing sector listed company profits growth slowed in Q3, owing to rising input costs.
Devendra Kumar Pant, chief economist at India Ratings & Research, added that the FY24 growth came in higher than any analysts' expectations and 30 basis points higher than the government's own FY24 first advance estimate. "The major reason for the higher growth rate was lower growth in FY23 than earlier. No doubt the growth momentum is strong, and this will have an impact on FY25 growth projections as well," he told NDTV Profit.
Banks like IDFC First have also expressed optimism while setting a carve for risks to the extent of a global growth slowdown and muted urban consumption as urban wage growth slows.
On behalf of IDFC First Bank, India Economist Gaura SenGupta also concurred that the bank will be marginally revising its FY25 GDP growth projections. "FY25 GDP growth is expected to be 6.5%, up from an earlier estimate of 6.0%... The support for the capex cycle from government expenditures is expected to reduce in FY25, with a focus on fiscal consolidation. Hence, recovery in private capex will be key to sustaining capex recovery," she said.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories ā On NDTV Profit.
