State Bank of India’s economic research department has upgraded its baseline forecast for FY24 GDP growth to 6.7 per cent from earlier forecast of 6.2 per cent, continuing on the path of strong activity in FY23.

The ERD said demand rebalancing from private consumption to investment in FY23 will spur growth in FY24. It projected Q1 GDP growth at 7.8 per cent, Q2 at 6.5 per cent, Q3 at 6.3 per cent, and Q4 at 6.2 per cent, amid broadly balanced risks.

Referring to India’s economy growing by 7.2 per cent in FY23 as against the NSO’s earlier estimate of 7 per cent (SBI estimate: 7.1 per cent), the ERD, in its report “Ecowrap” said, the better than expected growth is primarily due to 6.1 per cent GDP growth in Q4 FY23 GDP.

Also read: RBI economic activity index nowcast Q1 GDP growth forecast at 7.6%

“Overall despite some slowdown in demand, the overall economic strength remains intact. The rebalancing of demand from private consumption to investments supported by government capex needs further support.

“The private investment activity looks robust and domestic monetary and credit conditions remain supportive of growth in FY24,” Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, said.

The report noted that the construction sector has remained upbeat due to sustained impetus on infrastructure spending by the Government.

The healthy order book position of the construction sector, aided by about 11 per cent growth in FY23 (to around ₹7 lakh crore for nine construction players), reflects medium term revenue visibility in the space and improvement in rural employment, it added.

“Investment activities, driven by Government’s capex push, are at an all-time high. Led by the private sector’s new investment announcements, as per projects today, touched an all-time high of ₹37 trillion in FY23 as compared to ₹20 trillion in FY22,” the ERD said.

Also read: JP Morgan raises India’s FY24 GDP forecast to 5.5%

The report noted that scheduled commercial banks’ (SCBs) credit growth remained strong at 15.5 per cent as on May 5, 2023, albeit down from the peak of 17.8 per cent recorded in October 2022 due to an unfavourable base effect and moderation in credit growth to the industrial sector.

The sector-wise credit for April 2023 indicates that except for Industry, credit to all other sectors has jumped significantly. The credit-to-GDP gap narrowed, reflecting the improved credit demand in the economy in the face of rising capacity utilisation in the manufacturing sector.