Economists at the State Bank of India (SBI) have projected a GDP growth of 4.6 per cent for the December quarter, citing that as many as 30 high frequency indicators are not as robust as they were in the previous quarters. However, the projection is higher than the Reserve Bank of India's forecast of 4.4 per cent for the third quarter of this fiscal.
“The lower forecast also stems from poor corporate results, ex-BFSI, which have shown that operating profits grew at a much slower 9 per cent in the third quarter, which is just half of 18 per cent recorded in the year-ago period. Also, despite a 15 per cent in net sales, the bottom line was down by around 16 per cent”, Soumya Kanti Ghosh, the Group Chief Economic Adviser at SBI, said. Ghosh said he expects an upward revision in growth to 7 per cent for the full fiscal, up from 6.8 per cent projected earlier. This is because the government is anticipated to revise the GDP numbers for FY20, FY21 and FY22 on February 28. Additionally, there will be revisions in quarterly numbers of FY20, FY21, FY22 and even for the Q1 and Q2 of FY23, he added.
As per the report, corporate margin seems to be under pressure as reflected in results of around 3,000 listed companies, excluding financial services companies, due to higher input costs with decreasing margins. Margins declined from 15.3 per cent in Q3FY22 to 11.9 per cent in Q3FY23, and this could pull down manufacturing growth in Q3, he added.
Meanwhile, India Ratings in a report said it expects GDP to grow 5.9 per cent in FY24, lower than most other forecasts. Although there are a few positives for growth such as sustained government capex, deleveraged corporates, low NPAs, production-linked incentive scheme and likely coiling in global commodity prices, they are still not sufficient to take the GDP growth beyond 6 per cent in FY24, it added.
Another reason is the falling merchandise exports due to the global slowdown and merchandise imports not moderating proportionately, Sunil Kumar Sinha, the Principal Economist at the agency, said. The report noted that industrial growth is expected to remain tepid because of the K-shaped recovery, which is neither allowing consumption demand to become broad-based nor helping the wage growth especially of the population belonging to the lower half of the income pyramid.
The industrial sector is projected to grow 3.9 per cent in FY24 down from 4.1 per cent. Services, the largest component of the GDP, on the other hand, is estimated to grow 7.3 per cent compared to 9.1 per cent in FY23.
