Q3 GDP data tomorrow: Growth seen at 6.8% with slight moderation likely in economic activity, says SBI’s Ecowrap

The State Bank of India's (SBI) research 'Ecowrap' believes that the GDP growth for the December quarter of the fiscal year 2024 (Q3FY24) – to be announced tomorrow – is likely to be 6.8 percent, assuming no changes to the base figures. However, there is potential for it to reach 7 percent in case of any downward revisions in the GDP growth figures for the third quarter of the fiscal year 2023 (Q3FY23). These revisions in the previous year's data could positively impact the current year's growth figures.

As per the report, the CLI Index (a basket of 41 leading indicators which include parameters from almost all the sectors) based on monthly data shows a slight moderation in economic activity in Q3. Factoring the slight decline in economic activity in Q3 FY24, it estimates GDP should grow in the range of 6.7-6.9 percent with a Gross Value Added (GVA) growth of 6.6 percent.

READ HERE: India's GDP growth to moderate in Q3 & Q4; Capex to remain tepid: ICRA's Aditi Nayar

The brokerage further informed that its estimates are corroborated with the in-house developed SBI-ANN (Artificial Neural Network) model, with 30 high-frequency indicators. ANN has been trained for the quarterly GDP data from 2011Q4 to 2020Q4 and the in-sample forecast performance of the model in the training period has been precise.

According to the government’s first estimates, the Indian economy will grow at 7.3 percent in FY24, faster than the RBI’s upwardly revised estimate of 7 percent. The World Bank expects the Indian economy to grow 6.3 percent in FY24, while the International Monetary Fund (IMF) recently revised its estimate from 6.3 percent to 6.5 percent. In the preceding July-September quarter of the current fiscal (Q2FY24), the Indian economy grew 7.6 percent, remaining the fastest-growing major economy in the world, according to GDP data released in November 2023.

Globally, the likelihood of the global economy exhibiting stronger-than-expected growth in 2024 has brightened in recent months, with risks broadly balanced. Accordingly, the IMF upgraded its global growth forecast to 3.1 percent in 2024 and 3.2 percent in 2025 in its Jan’24 World Economic Outlook, it noted.

READ HERE: India’s GDP growth likely slowed to 6.6% in Q3: Mint poll

On the flip side, the UK and Japan entering recession signal a need for reevaluation, worsened by Bundesbank's warning about stress on Germany's economy. This echoes a global trend, with countries from various regions, particularly the EU, facing divergent economic challenges post pandemic, stated SBI. Moreover, quantitative easing and price inflation have strained economies worldwide, exemplified by China's deflation worries due to a property bubble and debt burdens. This slowdown, alongside China's geopolitical tensions, dims prospects for global recovery, especially in industrial and commodity demand, said the report.

However, as a counter-narrative to the global gloom, consumer confidence has strengthened further in India, driven chiefly by optimism about the general economic situation and employment conditions. Various enterprise surveys also point towards strong business optimism, highlighted SBI.

Corporate Results

SBI also observed that corporate India has continued its robust performance, buoyed by incrementally accelerating consumption patterns across the urban-rural landscape. Corporate results, as recorded from around 4000 listed entities, for Q3FY24, show robust growth of more than 30 percent in both EBIDTA and PAT, while the top line grew by around 7 percent as compared to Q3FY23, it mentioned.

READ HERE: Strategy: MS sees a significant opportunity for bottom-up stock-picking in India

Further, listed entities reported improvement in margin, as reflected in results of around 3000 listed entities ex BFSI, with EBITDA margin of 14.95 percent, on an aggregate basis, during Q3FY24 as compared to around 12 percent during the same period last year, it pointed out.

Corporate GVA, as measured by EBITDA plus employee expenses also reported a strong growth of around 26 percent in Q3FY24 as compared to Q3FY23, added the report.

Agriculture GVA

The First Advance Estimates indicate a projected decline in major kharif crop production for 2023-24 by approximately 4.6 percent compared to FY23, totaling 148.5 MMT. Conversely, the conclusion of the rabi crop sowing season on February 23 suggests a slight increase in overall acreage, albeit with concerns arising over cereals, which saw a 6.5 percent decrease in sown area compared to the previous year.

READ HERE: India Ratings expects GDP growth to slow to 6.5% in FY25

While agriculture may experience moderation if the rabi output fails to offset the kharif shortfall, there's optimism regarding the growth potential in the inland fish production sector. From 2014-15 to 2022-23, inland fish production witnessed rapid growth, reaching 131.13 lakh tonnes in 2022-23. This sector's contribution, constituting about 1.07 percent of the total national GVA and 6.86 percent of agricultural GVA, may potentially support the growth of the agri & allied sectors in FY24.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.