DBS Group Research expects India’s GDP growth to moderate to 6.3 per cent in the fourth quarter ended March 31, 2024, from 8.4 per cent recorded in the third quarter this fiscal.

The growth slowdown is led by a deterioration in industrial production, passenger vehicles, commercial vehicles, farm tractor sales, and weak government expenditure, DBS Group Research said in its latest research note (GDP Nowcast).

However, aided by an improvement in credit, and external trade in goods and services during the current quarter, India’s GDP growth for the current fiscal is expected to average 7.7 per cent, it added. This is slightly better than the earlier forecast of 7.6 per cent for FY’23-24.

Based on the incoming high frequency data for February-March 2024, there is an upside risk to the annual growth pace, said Radhika Rao, Senior Economist and Daisy Sharma, analyst, in the latest research note (India GDP Nowcast).

India’s GDP growth has been surprising positively, averaging above 8 per cent in the first three quarters this fiscal.

For the third quarter ended December 31, 2023, real GDP surpassed expectations to grow by 8.4 per cent year-on-year. This was accompanied by revisions to the Q1 and Q2 numbers to 8.2 per cent and 8.1 per cent, up from 7.8 per cent and 7.6 per cent respectively. 

The Centre has also revised its forecast for GDP growth for 2023-24 to 7.6 per cent from 7.3 per cent earlier. The Reserve Bank of India (RBI) Governor Shaktikanta Das had earlier this month said he expects India’s GDP growth for the current fiscal might be closer to 8 per cent. For the next fiscal, RBI has projected India’s GDP growth at 7 per cent. 

For the fourth quarter ended March 2024, RBI has pegged the GDP growth forecast at 5.9 per cent. 

Indian economic growth in recent years has largely been fuelled by higher government spending on Capex. Gross fixed capital formation (GFCF) as a percentage of GDP hit a many year high in the December 2023 quarter. The government induced Capex was expected to “crowd in” private investments and one is now seeing “green shoots” in private capex. 

The Central Government’s capital expenditure has been lifted to an 18-year high of 3.1 per cent of GDP, and is expected to rise further to 3.4 per cent of GDP by FY24-25, as set out in the interim budget.

Indian economic growth remains buoyant, but real consumption has slowed. The consumption expenditure survey released recently after an 11-year gap shows that the real monthly per capita expenditure (MPCE) growth halved to 3.2 per cent in rural areas and 2.8 per cent in urban areas.