The GDP data for the latest April-June 2024 quarter is set to be released at 5:30 pm on Friday, August 30. The quarter saw a contraction in government capital expenditure due to elections and a dip in urban consumer confidence. Therefore, analysts expect a slower GDP growth of 6 per cent-7.1 per cent for Q1 FY25, compared with 7.8 per cent in the preceding quarter (Q4 FY24).
Rating agency Icra expects India’s GDP to grow 6 per cent in Q1FY25, State Bank of India (SBI) sees a 7.1 per cent growth, Acuite Ratings & Research pegs the Q1 GDP growth at 6.4 per cent. Though Anand Rathi Research expects the Indian economy to expand by 7 per cent, the RBI sees the country’s GDP growth at 7.1 per cent in the April-June 2024 quarter. Here’s what you need to watch out for in the latest GDP numbers:
Consumption
Private final consumption expenditure is the largest component accounting for about 60 per cent of the GDP. Its movement has a huge weightage on the entire GDP number.
In the preceding quarter ended March 2024, private final consumption expenditure (PFCE) grew 3.98 per cent year-on-year to Rs 24.97 lakh crore in Q4 FY24. Government final consumption expenditure (GFCE) rose 0.89 per cent YoY to Rs 5.12 lakh crore.
Investment and Infrastructure
Gross fixed capital formation (GFCF) is an indicator of investment activity in the country. A growth in GFCF indicates a jump in investment in the country.
“Gross FDI inflows increased from $17.8 billion in Q1 FY24 to $22.5 billion would be reflected in the investment rate in the economy. The investment rate is a significant component of the Indian economy. Although capital expenditure from the centre and states declined in Q1 of FY25, it is likely to be offset and pushed up from investments by households and corporations,” Sandeep Vempati, an economist with the BJP, said.
Agriculture Growth
Agriculture is the sector that remained resilient during the pandemic period. It provided positive growth when all other sectors posted negative growth during the lockdown.
“Amidst a decline in the output of most rabi and summer crops and a deficient rainfall seen in June 2024, ICRA expects the GVA growth of agriculture, forestry and fishing to print at 1.0% in Q1 FY2025,” ICRA said in a report.
Meanwhile, the year 2023 was an El Nino year causing shortfall in rains, India’s agriculture sector declined to minus 0.8 per cent growth in Q3 FY24.
Manufacturing Growth/ Industrial Sector
Manufacturing growth was hit majorly first during the coronavirus pandemic and then due to the Russia-Ukraine war that led to supply disruptions, which increased commodity prices and thus input costs for companies.
ICRA estimates the industrial GVA growth to record a moderation to 6.4% in Q1 FY2025 from 8.4% in Q4 FY2024, led by manufacturing (to +7.0% from +8.9%) and construction (to +4.0% from +8.7%). In contrast, electricity (to +11.0% from +7.7%), and mining and quarrying (to +6.5% from +4.3%) are projected to record an uptick in growth.
GDP is the total value of goods and services produced in a given period, while GVA is GDP minus net taxes (gross tax collection minus subsidy).
Services Sector Growth
ICRA said the heat wave during April-June affected footfalls in various services sectors, even as it provided a significant boost to electricity demand.
Suman Chowdhury, executive director and chief economist at Acuité Ratings & Research, said, “The general momentum of domestic economic activity has witnessed some moderation in the first quarter of the fiscal, with some high frequency indicators indicating an adverse impact of the general elections along with the excessive summer heat conditions in some sectors of the economy. Lower growth in industrial output along with lower than expected profitability may translate to weaker GVA growth in the manufacturing sector.”
The Indian economy grew 8.2 per cent in the June 2023 quarter (Q1 FY24), 8.1 per cent in the following September quarter (Q2 FY24) and 8.4 per cent in the December quarter of 2023-24 (Q3 FY24).
India’s GDP expanded 7.8 per cent in the March quarter of 2023-24 fiscal.
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