GDP growth to moderate sequentially to 6% in Q3 FY2024, projects ICRA

Rating agency ICRA on Wednesday projected GDP growth to moderate sequentially to 6 per cent in the third quarter of FY24 from 7.6 per cent in the preceding three months mainly due to subdued performance of agriculture and industrial sectors.

Further, it said the GVA (Gross Value Added) growth is estimated to ease to 6 per cent in the October-December quarter FY24 from 7.4 per cent in the second quarter of the last fiscal.

The anticipated deterioration in the industrial sector growth in the third quarter is partly attributable to an adverse base effect and a deceleration in volume expansion, even as the continued deflation in commodity prices kept the profitability of some sectors favourable.

Additionally, a mild 0.2 per cent contraction in the total spending of the government of India and the 25 state governments (all states except Arunachal Pradesh, Goa, and Manipur) in the October-December period is expected to have dulled the GVA growth in the quarter.

"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 to 6 per cent in Q3 FY24 from 7.6 per cent in Q2 FY24," said Aditi Nayar, Chief Economist, ICRA.

In contrast to industry and agriculture, ICRA estimates the services sectors' GVA growth year-on-year to rise to 6.5 per cent in the third quarter of the current fiscal from 5.8 per cent in the July-September period of 2023-24, led by trade, hotels, transport, communication, and services related to broadcasting.

It also said that the centre's non-interest revenue expenditure contracted by a significant 19.1 per cent in the third quarter of the current fiscal, after having expanded by 23.2 per cent in the preceding three months, which would dampen the performance of public administration, defence, and other services.