Q2 GDP: Brokerages and experts say growth to exceed 7 percent

All eyes are set on India's gross domestic product (GDP) growth data for the September quarter of FY24 (Q2FY24) which will be announced later on Thursday (November 30). Most experts believe that the Q2 GDP growth data will likely surpass RBI's estimates for the second time in a row in the current fiscal.

RBI expects the country's GDP growth at 6.5 percent for the second quarter of FY24, which was the same as its estimate for the June quarter (Q1FY24). If Q2 GDP comes around 7 percent or above, which most analysts expect then it would be the second consecutive quarter where the economy has surpassed RBI's estimates in this fiscal.

In Q1FY24, India's GDP expanded to 7.80 percent, surpassing market expectations of 7.7 percent and RBI forecast of 6.5 percent.

However, going ahead RBI expects India's GDP growth to slow after Q2. In the third and fourth quarters, it sees GDP growth coming in at 6 percent and 5.7 percent respectively. For overall FY24, RBI expects GDP growth to be at broadly 6.5 percent.

Read here: India's Q2 GDP number will surprise everyone: RBI Governor Shaktikanta Das

Let's take a look at what various brokerages expect India's GDP growth to be in Q2 as well as in FY24.

Barclays

The brokerage believes India’s GDP in Q2FY24 expanded by 6.8 percent year-on-year (YoY), slower than the 7.8 percent print in Q1FY24, but still showing robust sequential growth.

"Growth in services is likely to moderate from the double-digit seen in Q1FY24, but still strong nevertheless (nearly 7.7 percent), according to our estimates. Underlying growth trends continue to look robust in India, with activity underpinned by domestic consumption, high levels of state-led capex, and strong growth in the utilities sectors," Barclays said in a report.

Export growth is likely to stay weak, but the overall impact of sustained improvement in services exports, coupled with lower imports, implies that the contribution of net exports to GDP was a much smaller drag in Q3 (July-September) than it has been in the preceding quarters, it added.

ICRA

The rating agency expects India's economic activity is expected to grow at 7 percent in Q2FY24 from 7.8 percent in Q1FY24, while remaining robust, amid an anticipated dip in agricultural growth owing to the sub-par monsoons, and a modest easing in that for services, even as industrial growth is likely to have risen aided by a pick-up in volume growth and an improvement in margins for some sectors

Although the rating agency expects the GDP growth in Q2 FY2024 to exceed the estimate of 6.5 percent for that quarter, it believes the momentum is unlikely to sustain thereafter.

"Uneven rainfall, narrowing differentials with year-ago commodity prices, the possible slowdown in momentum of Government capex as we approach the parliamentary Elections, weak external demand and the cumulative impact of monetary tightening are likely to translate into lower GDP growth in H2 FY2024," it explained

Therefore, ICRA maintains its FY24 GDP growth estimate at 6 percent, lower than the MPC's projection of 6.5 percent for the fiscal.

Read here: India Q2 GDP data due on Thursday; how can it impact the market?

ING

ING sees India's GDP moderating to 7.1 percent in Q2. Nonetheless, this result should surpass the Reserve Bank of India's projections, as domestic economic activities remain robust and services and capital expenditure continue to drive growth, it said.

IDFC First Bank

It projects India's Q2 growth rate at 6.7 percent. The combination of government capex and strong growth in real estate services has supported the construction sector with a pick-up in steel consumption and cement production,” IDFC First Bank said in a note.

SBI Research

SBI Research forecasts that the quarterly GDP growth for Q2FY24 should be at 6.9-7.1 percent, though there could be still a forecasting bias.

Domestic economic activity in Q2 has been supported by robust agricultural performance, sustained buoyancy in services, strong capital expenditure by the Centre (49 percent of budgeted) and states (32 percent of budgeted) and a robust pickup in consumption expenditure, it noted. The mean growth rate thus comes at around 7 percent for Q2FY24. This will firmly push up the FY24 growth rate over RBI projections at 6.5 percent, it predicted

India Ratings and Research

According to India Ratings, the Q2 GDP growth will likely be 6.9 percent, a moderation from 7.8 percent in Q1.

In terms of the sectoral breakdown, services are expected to be the largest contributor to growth despite slower expected growth in the financial services and ‘trade hotels and transport’ categories. Agriculture might be a slight dampener but services have revived much stronger than expected. In totality, services have performed better than the manufacturing sector. Government-led capex has also been strong even though there are questions about it being sustainable. These along with high-end consumption seem to have contributed to growth, it stated.

SBI Research 

It forecasts that the GDP growth for the Q2FY24 should be at 6.9-7.1 percent.

"We forecast that the quarterly GDP growth for the Q2FY24 should be at 6.9-7.1 percent, though there could be still a forecasting bias. The mean growth rate thus comes at around 7 percent for Q2FY24. This will firmly push up the FY24 growth rate over RBI projections at 6.5 percent," said SBI Research in its Ecowrap note.

FY24 GDP forecast

Morgan Stanley Research

It expects India's economic growth at around 6.5 percent for FY2024 and FY2025, citing strong domestic fundamentals.

The research arm of the investment bank, in its 2024 India Economics Outlook, said the domestic demand supported by strength in corporate and financial sector balance sheets and the follow-through of policy reform measures will aid India's growth amid a global slowdown.

Moody's

Moody's expects India's GDP (gross domestic product) to grow 6.7 percent in 2023, 6.1 percent in 2024 and 6.3 percent in 2025.

The rating agency, in its Global Macro Outlook 2024-25 report, said India along with other emerging market economies like Brazil, Mexico, and Indonesia are well-positioned to capture a greater share of global trade flows due to the push from the West to diversify supply chains away from China amid geopolitical tensions.

"While India, Brazil, Mexico and Indonesia could emerge as engines of global growth, risks to growth forecasts for these countries are tilted to the upside," it said.

S&P Global

S&P Global Ratings said India’s economy in FY24 will grow at a faster clip than it previously projected before hitting a slower-than-estimated trajectory in the next financial year. The rating agency revised the Gross Domestic Product (GDP) growth projection for financial year 2024 to 6.4 percent from 6 percent earlier on the back of strong domestic tailwinds. However, it lowered the growth projection for the financial year 2025 to 6.4 percent from 6.9 percent earlier.

Goldman Sachs

It expects India's real economic growth to be 6.5 percent in 2023 and 6.3 percent in 2024 - the highest among large economies in the region, but slightly below the Indian central bank's target of 6.5 percent for fiscal 2024.