Slower Q4 Growth Expected Amid Weak Services, Factory Output

India’s GDP growth for Q4 FY24 is projected to slow to 6.2-7.3%, down from over 8% in previous quarters, due to sluggish manufacturing and services. However, full-year FY24 growth is anticipated to be around 7.8%, exceeding the second advance estimate of 7.6%. The National Statistical Office will release the Q4 and provisional FY24 GDP data on May 31.

Agricultural Gross Value Added (GVA) is expected to contract for the second consecutive quarter, with a forecast of -0.5% for Q4 FY24, attributed to weak rabi crop yields. ICRA projects GDP growth at a four-quarter low of 6.7% for Q4 FY24, down from 8.4% in Q3, due to lower volume growth and reduced gains from commodity prices. HDFC Treasury Research estimates Q4 GDP growth at 6.5%, citing moderation in manufacturing and services.

Economists predict post-election growth uptick, with DBS Group Research noting a typical pre-election slowdown followed by post-election growth and inflation surge. DBS expects Q4 GDP growth at 7%, approaching 8% for the full year. IDFC FIRST Bank anticipates subdued manufacturing growth, but improved rural consumption in Q4 FY24, bolstered by higher FMCG sales in rural areas.

Government capital expenditure grew significantly, but may have eased in March due to the Model Code of Conduct. Private consumption expenditure is estimated to have slowed to 3% in FY24, prompting calls for demand-focused policies.

Despite the anticipated slowdown, some economists expect an upside surprise in Q4 GDP growth, similar to Q3. Deutsche Bank forecasts the highest Q4 growth at 7.3%, supported by high-frequency indicators suggesting over 7% growth. Real GVA growth for Q4 FY24 is projected at 6.5% by Deutsche Bank, 90 basis points lower than their GDP estimate.