Several brokerages have raised their full year gross domestic production growth forecasts on better-than-expected growth of 7.6 percent in the September quarter aided by robust domestic demand. Analysts, however, said weaker FDI inflows, potential credit softening and normalisation of base effects could soften growth.
The numbers released on November 30 showcased robust growth in investment and government spending, while private consumption lagged. Analysts noted investment dominance over consumption and the industry outperforming services.
Goldman Sachs has revised its CY23 GDP growth forecast upward by 20 basis points to 6.7 percent but left the CY24 number unchanged at 6.2 percent on-year.
One basis point in one-hundredth of a percentage point.
Also Read | India Q2 GDP: July-September growth at 7.6%, sharply above forecasts
Downside risks to growth
Despite the positive adjustments, there are concerns about potential downside risks to the CY24 growth, mainly due to new regulatory measures introduced by the Reserve Bank of India, adding a layer of uncertainty, analysts said.
Analysts at Citi said the latest GDP data affirmed two-paced growth momentum. It indicates that investment is outpacing consumption. Citi adjusted its FY24 real GDP forecast upwards by 50 basis points to 6.7 percent on-year.
Also Read: Barclays, Citi raise India’s growth closer to 7% after GDP beat
The growth and inflation data observed since October reaffirms the RBI's stance of “withdrawal of accommodation”. Given these economic indicators, Citi anticipates a status quo on interest rates and stance during the December MPC meeting.
| Brokerage | New Estimate | Old Estimate |
| Goldman Sachs (CY24) | 6.2% | 6.2% |
| Citi (FY24) | 6.7% | 6.2% |
| Nuvama (FY24) | 6.5% | 6.5% |
| Morgan Stanley (FY24) | 6.9% | 6.4% |
Also Read | GDP growth surprises positively driven by investments despite a strong external sector drag
Diverging trends in GDP growth
HSBC noted that the industrial sector exhibited greater strength compared to the services sector. Urban areas outperformed rural regions in economic activity. Weaker Foreign Direct Investment (FDI) inflows, a potential softening in credit growth, and the normalisation of base effects could soften growth over the next few months, the research firm said.
Morgan Stanley raised the GDP growth forecast to 6.9 percent on-year for FY24, an increase from the previous estimate of 6.4 percent. The adjustment reflects the positive momentum driven by strong economic activities within the country.
Despite this revision, the international brokerage maintains its estimate for the FY25 GDP growth at 6.5 percent, suggesting a balanced outlook for the subsequent fiscal year.
Analysts at Nuvama Institutional Equities expect the second half (H2) of FY24 to be much weaker in terms of growth, as they expect margins tailwind to taper off and poor monsoons to shave off agriculture GDP.
Also Read | India’s Q2 GDP growth beyond expectations, RBI may opt for a hawkish stance
Government spending is also expected to slow materially in H2 and the RBI’s tightening of norms for consumer loans could also weigh on demand. The domestic brokerage maintained FY24 real GDP growth at 6.5 percent.
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