GDP growth to slow down below 6% in Q3: ICRA

This is mainly due to a significant decrease in the output of kharif crops and slow progress in rabi sowing for some crops

January 19, 2024

ICRA emphasised the downturn in the government's capital expenditure in October-November 2023

The agency also highlighted that average daily vehicle registrations from January 1-16, 2024, were 39.2% higher than last year

Year-on-year growth in electricity demand increased modestly to 3.4% in January 2024

Despite the moderation in year-on-year growth, the index experienced a sequential increase of 1.4% in December 2023

Rating agency ICRA has foreseen a slowdown in India’s GDP growth rate to below 6% in the December quarter. This is primarily attributed to a significant decline in the output of kharif crops and sluggish progress in rabi sowing for certain crops. India recorded a GDP growth rate of 7.6% from July to September.

ICRA emphasised the downturn in the government’s capital expenditure in October-November 2023 (-8.8% year-on-year) and anticipated little-to-no growth in agricultural Gross Value Added (GVA) due to the sharp decline in Kharif crop output and weak progress in rabi sowing for certain crops.

The agency also highlighted that average daily vehicle registrations from January 1-16, 2024, were 39.2% higher than last year. However, they were 1.8% lower than the registrations of 6,46,000 units/day in December 2023, mainly due to the inauspicious Kharmas period and seasonality. Additionally, year-on-year growth in electricity demand increased modestly to 3.4% in January 2024 (up to January 15) from 1.6% in December 2023, remaining subdued due to an elevated base.

The year-on-year growth in ICRA Business Activity Monitor decreased for the second consecutive month, reaching a six-month low of 8.1% in December 2023, compared to 7.9% in December 2022 and 9.6% in November 2023. Several factors contributed to this decline, including a reduction in activity momentum after the festive period, decreased demand for electricity and petrol due to the onset of winter in North India, and unfavourable base effects for some indicators.

Despite the moderation in year-on-year growth, the index experienced a sequential increase of 1.4% in December 2023. This growth was driven by eight of the 14 non-financial indicators. ICRA noted that although the Business Activity Monitor suggests healthy economic activity in the third quarter of the fiscal year, trends across various indicators indicate some softness compared to the previous quarter, partly due to base normalisation.

Source: Economic Times

GDP

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