GDP growth could slow down in the third quarter of this fiscal; experts peg it at less than 7%

The economy is seen to have slowed down in the third quarter of the fiscal with GDP growth estimated at less than 7%, according to most analysts on account of external sector uncertainities and muted growth in agriculture and industry. Most analysts also expect economic growth in the fiscal 2023-24 to be slower than the official projection of 7.3%.

Bank of Baroda has projected GDP growth in the October to December 2023 quarter at 6.4% led by subdued growth in agriculture and industry sector. Service sector is expected to lift up growth. “For the full year, our estimate is 6.8%. Going ahead for FY25, growth will be at a similar level of 6.75-6.8%,” it said in a note on Friday.

The economy grew by a much faster 7.6% in the second quarter of the fiscal. However, GDP growth was more subdued at 4.5% in the third quarter of 2022-23. The National Statistical Office will release the GDP growth estimates for the third quarter of the fiscal as well as the second advance estimates for 2023-24 on February 29.

Rahul Bajoria, MD and Head of EM Asia (ex-China) Economics, Barclays said headline growth likely slowed to 6.7% year-on-year in the quarter ended December 31, 2023. “Value added in manufacturing was likely aided by an improvement in profit margins, while growth in most other sectors decelerated. Domestic demand continues to drive GDP, but early signs of recovery in external demand likely supported net exports,” he said in a note.

A slowdown in state-led capex, which has been propelling investment, likely contributed to the expected deceleration in the quarter, Barclays further said. “However, slower GDP growth should be seen in the context of elevated growth of 7.7% in the first half of the fiscal,” it further said.

ICRA has projected the year-on-year growth of the GDP to moderate sequentially to 6% in the third quarter of the fiscal and the GVA growth to ease to 6% in the third quarter from 7.4% in the second quarter of the fiscal. Aditi Nayar, Chief Economist, Head-Research and Outreach, ICRA Ltd, said, “Lower volume growth for the industrial sector, flagging momentum in certain indicators of investment activity, a slowdown in Government expenditure and an uneven monsoon are expected to dampen the GDP growth in the third quarter.”

The Reserve Bank of India (RBI) has pegged GDP growth at 7% in the current fiscal with third quarter growth at 6.5% and fourth quarter at 6%. An article on the State of Economy in its monthly bulletin for February said that the likelihood of the global economy exhibiting stronger than expected growth in 2024 has brightened in recent months, with risks broadly balanced. “The Indian economy continues to sustain the momentum achieved in the first half of 2023-24, going by high frequency indicators,” it said.