India Q2 GDP: Indian economy poised for strong growth in FY24? Here’s what top economists say

India's September quarter (Q2) GDP print came above expectations on Thursday driven by robust growth in the manufacturing, mining and construction sectors. However, growth in the agriculture segment cooled due to an erratic monsoon.

India's Q2 GDP grew 7.6 per cent, significantly exceeding the expectations. A Mint poll of 18 economists had estimated the gross domestic product (GDP) growth to be about 6.8 per cent in the quarter.

In the first quarter of the current fiscal year, the Indian economy expanded by 7.8 per cent.

Top economists shared their views on India's Q2 GDP number and the road ahead. Take a look:

Suman Chowdhury, Chief Economist and Head, Research, Acuité Ratings and Research

Given the exceptional growth print in Q2FY24 and the average 7.7 per cent YoY growth in the first half of the current financial year (H1FY24), there is a rationale for a review of our 6 per cent growth forecast for the full year. Nevertheless, we acknowledge that the base factor will not be in action in the second half of the year and there are material risks of lower agricultural output and weaker rural consumption.

In the coming MPC meeting, we also expect RBI to take note of the stronger growth momentum in the current year and the likelihood of a fresh buildup of inflationary pressures particularly if food inflation gets affected by the El Nino weather events.

However, we believe any rate hike is unlikely although the system liquidity may be kept relatively tight. Any rate cut decision appears unlikely over the next six months.

Also Read: India’s Q2 GDP growth story, in 5 charts

Aditi Nayar, Chief Economist, Head - Research and Outreach, ICRA

Looking ahead, we project GDP growth to moderate significantly in the second half of the current financial year (H2FY24), with the continuing headwinds such as the normalising base, weak outlook for agri output and rural demand, tepid global growth, narrowing differentials in commodity prices and transmission of past monetary tightening.

Additionally, the possible slowdown in the momentum of government capex as we approach the parliamentary elections could constrain growth outcomes. Given the higher-than-forecast outcome for Q2, we are revising our FY24 growth forecast to 6.2 per cent from 6 per cent.

Madhavi Arora, Lead Economist, Emkay Global Financial Services

The stellar Q2 growth is underpinned by cyclical factors like robust corporate profits and a strong fiscal impulse, with front-loaded government spending in a pre-election year, while factors like deflator issues in growth accounting may have also augured well for the print.

Manufacturing alone explains more than 33 per cent of the GVA (gross value added) growth, while services, excluding government-related, have slowed.

Even as a stronger-than-envisaged H1 (7.7 per cent) implies that FY24 growth may now track 6.6 per cent, H2 is still likely to see lower growth to nearly 5.5 per cent owing to cyclical headwinds such as (i) relatively slower government spending, (ii) fading terms-of-trade gains from lower commodity prices, (iii) sub-par agri performance, (iv) tighter lending standards, and (v) weaker exports.

Dharmakirti Joshi, Chief Economist, CRISIL

After a strong growth of 7.8 per cent in the first quarter, the second quarter, too, surprised on the upside with 7.6 per cent growth. This takes the first half of GDP growth to a robust 7.7 per cent.

However, we still expect growth to slow in the second half due to a deepening global slowdown; the lagged impact of domestic rate hikes manifesting fully through the second half of this fiscal; and erratic weather and an El Niño event creating some downside to agricultural growth prospects. 

The advance estimates from the Ministry of Agriculture peg kharif production at 4.6 per cent lower than last year.

Despite moderation in the second half, India is expected to outperform other large economies this fiscal year.

Also Read: SBI Research raises India's FY24 GDP forecast to 7% from 6.7%

Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers

India's GDP growth for the quarter ending September 2023 has exceeded both our and consensus expectations. On the supply side, industrial activity has been the biggest surprise, while on the demand side, investment and government final consumption have surprised pleasantly. At the same time, the supply-side services sector and demand-side private final consumption performed worse than predicted. Agriculture was likewise a let-down.

While we expect growth to moderate in the second half of the current fiscal year, we now estimate full-year growth to be at least 20 basis points better than our previous forecast of 6.2 per cent. Rapidly falling inflation combined with faster-than-expected growth is good news for financial markets, notably equity markets. India remains the world's fastest-growing major economy.

Also Read: RBI likely to continue with hawkish stance after Q2 GDP shoots above estimates; Here's what experts say

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