NEW DELHI: As many as 28 agencies have forecasted India’s GDP to grow at 6.95% in the current financial year, which is about 25 basis points (bps) lower than the Reserve Bank of India’s (RBI) forecast.
According to a note by the Centre for Monitoring Indian Economy (CMIE), these agencies had earlier predicted growth at 7% last month, but recent macroeconomic data has led them to revise their estimates slightly downwards.
“Broadly, expectations are seen moderating as some forecasters caution about inflation, public spending, and industrial growth. While expectations of others ride high on consumption demand and the government’s fiscal discipline,” stated an article authored by CMIE’s Janaki Samant.
Recent forecasts made by 10 agencies during September and early October indicate a slightly lower growth expectation (median: 6.78%) compared to those made earlier. “They seem to have taken the recent slowdown seen in fast-frequency data releases,” Samant noted. Forecasts made during July-August converged to a slightly higher median expectation of 7%.
The RBI, however, has maintained its projection of 7.2% growth in three consecutive monetary policy statements. In October, the Monetary Policy Committee (MPC) cited strong consumption and investment demand as key drivers of growth this fiscal year.
The rate-setting panel highlighted that rural demand is expected to benefit from improved agricultural output, while urban demand would gain from the continued strength of the services sector. Investment activity would be supported by consumer optimism, healthy balance sheets of banks and corporate enterprises, and the government’s capex push, it noted.
The RBI’s Survey of Professional Forecasters conducted in September showed a median GDP growth projection for FY25 at 6.9%, 10 bps lower than its earlier estimate of 7%. A total of 47 professional forecasters participated in the survey, with projections ranging from 6% to 8.1%.
India’s economy grew by 6.7% in the first quarter of the current fiscal year. The RBI has projected GDP growth of 7% in Q2 FY25, 7.4% in Q3, and 7.4% in Q4. However, some economists believe that Q2 growth might fall short, possibly even below 6.5%.
“We are seeing a slowdown in high-frequency data, which despite signs of improvement in rural consumption may not be enough to offset the weakness in industrial data, posing material downside risks to the RBI’s Q2 FY25 GDP forecast of 7%,” Rahul Bajoria, India and ASEAN Economist at Bank of America, commented in a note.
In September, the PMI data for both manufacturing and services showed a significant deceleration in activity. The manufacturing PMI was at 56.5, an eight-month low, while the services PMI fell to a 10-month low of 57.7. Additionally, the Index of Industrial Production (IIP) contracted by 0.1% in August, marking the first contraction in 22 months.
GST collections also showed a modest year-on-year growth of 6.5% in September, the lowest in 39 months. In absolute terms, the collections stood at 1.73 lakh crore in September, slightly lower than the Rs 1.74 lakh crore collected in the previous month. Typically, collections rise in absolute terms in September compared to August, but FY25 marks the second instance (the first being FY20) where collections have fallen.
Source: The Financial Express
India Inc Biggies Set To Invest $800 Billion In A Decade: S&P Global Ratings 