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ICRA Research Report
India's gross domestic product growth is expected to inch up to ~4.5-5.0% in Q4 FY23 from 4.4% in Q3 FY23, amid the healthy rise in rabi output, uptick in YoY growth of high frequency indicators in Jan-Feb 2023 partly led by a low base, robust services demand and a moderation in commodity prices, even as the unseasonal rainfall in mid-March 2023 could adversely impact crop yields.
We expect consumer sentiments to improve through FY24, auguring well for consumption demand, although it would remain uneven. The potential return of El Nino conditions could hurt the prospects of crop output and rural demand, and put upward pressure on food inflation.
Nevertheless, the sizeable increase in the budgeted capex by the Government of India and several states is expected to provide support to economic activity, amid signs of an uptick in private capex, although execution remains key.
We expect India's GDP growth to moderate to ~6% in FY24 from 6.9% expected in FY23, largely on account of a drag stemming from slackening external demand, with downside of up to 50 basis points stemming from a deficient monsoon.
With two consecutive consumer price index inflation prints above-6.0% during Jan-Feb 2023, the Monetary Policy Committee is likely to vote for another non-unanimous rate hike in April 2023, following the recent rate hike by the U.S. Fed.
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