Economists predict GDP growth to be higher than RBI's 8% estimate for June quarter

By Team Newsable | First Published Aug 22, 2023, 11:18 PM IST

Both SBI and the Investment Information and Credit Rating Agency attributed their expectations of accelerated economic growth to capital expenditure by the central and state governments.

Economists anticipate that the country's real GDP growth in the first quarter will surpass the Reserve Bank of India's projection of 8 per cent. Notably, economists from the State Bank of India (SBI) forecast growth of 8.3 per cent, while the domestic rating agency Icra projected an even higher figure at 8.5 per cent. The RBI, which predicts a 6.5 per cent GDP growth for FY24, had initially estimated an 8 per cent growth for the April-June period.

Official growth data is scheduled to be released later this month. In the preceding quarter of March, the real GDP had expanded by 6.1 per cent compared to the same period a year ago.

Tap to resize

Latest Videos

Tap to resize

Both SBI and the Investment Information and Credit Rating Agency attributed their expectations of accelerated economic growth to capital expenditure by the central and state governments. The rating agency also emphasized the favourable impact of the lower base, considering the GDP had contracted by nearly a quarter in the first quarter of FY21.

SBI's group chief economic adviser, Soumya Kanti Ghosh, highlighted that the bank's estimate of 8.3 per cent growth was based on tracking 30 high-frequency indicators.

SBI's note pointed out a surge in capital expenditure during the first quarter, with the central government spending 27.8 percent of the budgeted amount and states at 12.7 percent. States like Andhra Pradesh, Telangana, and Madhya Pradesh, where elections are impending, experienced capital expenditure growth of up to 41 percent.

Both SBI and ICRA highlighted the contributions of the services sector, which continued to exhibit robust growth. They also indicated that widening profit margins in the corporate sector were benefiting growth prospects.

However, their opinions diverged on the economic growth projection for the entire fiscal year. SBI estimated FY24 growth at 6.7 per cent, while Icra projected a lower figure of 6 per cent, significantly below the RBI's estimate.

ICRA's chief economist, Aditi Nayar, cautioned that the second half of the fiscal year could face headwinds that might dampen growth. Factors like unpredictable rainfall, reduced differentials in commodity prices compared to the previous year, and a potential slowdown in government capex momentum due to approaching Parliamentary elections could constrain growth.

In SBI's June quarter estimates, the continued high credit growth and the ability of banks to maintain this trend despite lean balance sheets were noted as beneficial factors for the growth trajectory.

For more reliable and latest news