SBI pegs Q2 FY24 GDP growth at 7.0%, farm performance seen robust

India’s GDP may have grown by 7.0 percent in the second quarter of 2023-24 – faster than what the Reserve Bank of India (RBI) has predicted – according to Soumya Kanti Ghosh, State Bank of India’s Group Chief Economic Adviser.

“Domestic economic activity is being supported by robust agricultural performance, sustained buoyancy in services, the boost to investment
from the government’s thrust on capital expenditure, above trend capacity utilisation in manufacturing, double digit credit growth, and healthier corporate and bank balance sheets,” Ghosh said in a report on November 22.

Also Read: Questions over govt’s budget estimates as Q1 nominal GDP growth hits 9-quarter low

The statistics ministry will release GDP data for the second quarter of 2023-24 at 5:30pm on November 30.

At 7.0 percent, SBI’s growth forecast for July-September is 50 basis points higher than the RBI’s projection of 6.5 percent. One basis point is one-hundredth of a percentage point.

Growth is expected to exceed the Indian central bank’s forecast, with the RBI’s economists admitting as much in a recent article where they said there is “wide consensus” on the matter.

“The RBI’s projections incorporated a turnaround in the momentum of activity into expansion in Q2 and hence the consensus, if actualised, would imply a stronger pace of activity than projected. This optimism appears
to have been corroborated by corporate results for Q2,” RBI economists said in the monthly State of the Economy article on November 16.

Ghosh, too, noted the performance of Indian companies, saying the July-September saw a 31 percent year-on-year growth in profit after tax, with corporate results being strong and broad-based.

“Further, it is pertinent to mention that corporate margin, which was under pressure in the past year has shown signs of distinct improvement since Q4FY23 (January-March 2023). The EBITDA margin, on an aggregate basis of more than 3,000 companies, improved by 444 basis points to 15.19 percent in Q2FY24 as compared to 10.75 percent in Q2FY23 contributed by low input prices,” the SBI economist added.

While a GDP growth rate of 7.0 percent in July-September will be lower than the 7.8 percent in the preceding quarter, growth is seen coming down as the favourable base effect caused by the hit to growth from the coronavirus pandemic fades.

Also Read: CEA Nageswaran says Q1 GDP growth number ‘good’, maintains FY24 forecast of 6.5%

Beyond July-September, SBI’s Ghosh sees India’s GDP growth falling to 6.3 percent and 6.0 percent in the final two quarters of 2023-24. Both these figures are 30 basis points higher than the RBI’s official forecast. Consequently, his full-year projection is at 6.7 percent, compared to the RBI’s 6.5 percent.

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