The GDP data for India’s first quarter has been out for a month, giving analysts plenty of time to analyze. It is appropriate to look ahead and determine what the rest of the year holds for the economy as we approach the end of another quarter.
Looking back, the economy expanded at 7.8% in the first quarter of 2023–24, up from 6.1% in the fourth quarter of 2022–23, on the strength of a strong domestic demand and a supportive foundation.
Despite the arguments, the nation had the world’s fastest expanding major economy during that quarter. Even though we anticipate India to keep its title, there are a few factors that will cause the rate of growth to slow down during the next quarters.
The first is the fundamental impact. This will exceed the robust economic growth that was evident in the second quarter’s first two months (July-August).
For instance, the ICRA Business Activity Monitor, our internal composite index of high frequency indicators, had experienced year-over-year growth that increased from an average of 7.2% in the first quarter to 8.1% in July and then to a six-month high of 10.7% in August.
Early September data also point to a continuation of these encouraging trends. In the second quarter, we anticipate India’s GDP growth to be about 7%, higher than the Monetary Policy Committee’s prediction of 6.5. According to our analysis, the dissipation of the favorable base is a major factor in the predicted decline from the 7.8 percent in the first quarter.
These strong growth figures, nevertheless, are not likely to hold up in the second half of the year. ICRA projects a second-half GDP growth rate of 4.5–5%, significantly lower than the MPC’s forecast of 5.7–6%.
This will be driven by a variety of causes, some of which are exogenous, in addition to a further normalization of the base.
The kharif seeding of many crops has been inconsistent this year due to the monsoon’s extremely irregular behavior, with major gaps in crops like pulses. A dry August may also have an effect on yields, affecting kharif output and farm revenues as well as the inflation of food prices.
