Government’s Statistical Office will come out with economic growth number for July-September quarter (Q2 FY24) on Thursday. Based on projections made by economists, economy is likely to have grown by around 7 per cent on the back of better performance of the industrial sector.

GDP growth was 7.8 per cent during April-June quarter (Q1 FY24) and 6.3 per cent during Q2 FY 23. RBI has projected a growth rate of 6.5 per cent during Q2 FY24. However, RBI Governor Shaktikanta Das has recently said that the numbers would be higher.

“Looking at the momentum of economic activity and several early data points and indicators that have emerged, I can confidently say that the second quarter GDP figures, expected to be released at the end of November, in all probability will surprise everyone on the upside,” Das said in an event organised by a media house recently.

This prompted EY’s Chief Policy Advisor DK Srivastava to say that things would be better during the quarter under consideration.  

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“The prospects for Q2 FY24 growth appear to be at par, if not better, compared to the RBI’s estimate of 6.5 per cent,” he said. Further, recent months have seen buoyant high frequency indicators, justifying this optimism. IIP and core IIP growth averaged 7.4 per cent and 9.7 per cent, respectively in Q2 FY24.

Capital expenditure push

Higher capital expenditure by the Centre and States are expected to have impact on overall growth. In a report, economists at SBI forecasted that the quarterly GDP growth for the Q2 FY24 will be in the range of 6.9 per cent-7.1 per cent. This will firmly push up the FY24 growth rate over RBI projections at 6.5 per cent, the report added.

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Domestic economic activity in Q2 has been supported by robust agricultural performance, sustained buoyancy in services, strong capital expenditure by the Centre (49 per cent of budgeted) and States (32 per cent of budgeted) and a robust pick-up in consumption expenditure.

Meanwhile, ICRA has projected the year-on-year (YoY) growth of the GDP to moderate sequentially to 7 per cent in Q2. The GVA growth is estimated to ease to 6.8 per cent in Q2 from 7.8 per cent in Q1 driven by the services sector (to 8.2 per cent from 10.3 per cent) and agriculture (to 1 per cent from 3.5 per cent), amidst an improvement in industry (to 6.6 per cent from over 5.5 per cent).

Impact of erratic monsoon

Aditi Nayar, Chief Economist with ICRA, said that a normalising base and an erratic monsoon are expected to result in a sequential moderation in the GDP growth in Q2.

“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 per cent,” she said.