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Motilal Oswal Report
Real gross domestic product growth came in at a four-quarter high of 7.8% in Q1 FY24 versus 6.1%/13.1 in Q4 FY23/Q1 FY23. The number was in line with the market consensus (7.8%), though higher than our expectations (7.2%) and lower than Reserve Bank of India forecast of 8%.
Better private consumption (at 6% YoY versus our expectations of 3.5%) and investments (7.1% versus. our expectations of 4.7%) led to better than expected growth, while it was offset by weak fiscal consumption and real exports. Better growth was largely led by higher private consumption growth (6% in Q1 FY24 versus 2.8% in Q4 FY23), best in three quarters. Investment growth too remained robust. It grew 7.1% in Q1 FY24 versus 20.8% in Q1 FY23. On the other hand, exports contracted sharply in Q1 FY24, printing at -7.7% versus +19.6% in Q1 FY23. Imports, on the other hand, grew 10.1% in Q1 FY24. Thus, external trade subtracted 4.6% from real GDP growth in Q1 FY24, the highest quarterly drag on record since FY12.
Final domestic purchases (GDP excluding exports) grew at an eight-quarter high of 12.9% in Q1 FY24 versus 11.1% in Q1 FY23.
Further, while India's investments were 30.6% of GDP in Q1 FY24, same as in Q1 FY23; however, net imports were down to 2.3% of GDP from 3.8% in Q1 FY23. It implies that gross savings improved to 28.2% of GDP in Q1 FY24 versus 26.7% in Q1 FY23.
On gross value added basis, real/nominal growth was 7.8%/8% in Q1 FY24 versus 11.9%/25.9% in Q1 FY23. Farm and industrial growth was softer than expected, while services sector drove better than expected real GVA growth (versus our forecast of 7%).
Growth in the farm sector stood at a three-quarter low of 3.5% YoY in Q1 FY24, the growth in the industrial sector decelerated to 5.5% YoY (versus 9.4% growth in Q1 FY23) and services sector growth was 10.3% YoY (versus 16.3% YoY in Q1 FY23), best in four quarters. Growth in the services sector is mainly led by a 28-quarter high growth of 12.2% in financial and real estate services.
Overall, GDP growth remained robust led by higher domestic demand. On the expenditure side, consumption and investments provided cushion to real GDP growth. However, muted exports and discrepancies are worrisome. On the production side, services sector remained resilient but industrial activities grew slowly.
Due to better than expected growth in Q1 FY24, we will soon revise up our FY24 real GDP growth forecast, from 5.6% forecasted in June 2023, though nominal GDP growth may remain in single-digit, as expected.
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