Economists hike FY24 growth forecast close to 7%, RBI may follow suit next week

RBI

Even as the finance ministry digs into the latest GDP numbers, economists from outside the government have begun announcing huge upward revisions to their growth forecasts for 2023-24 following blockbuster data for the July-September quarter.

Data released on November 30 showed India's GDP grew at a robust 7.6 percent in the second quarter, sharply higher than market expectations of 6.8 percent and the Reserve Bank of India's (RBI) forecast of 6.5 percent. As a result, economists now see the India growth story accelerating faster than they anticipated.

"Owing to the robust July-September, we are raising our 2023-24 GDP growth projection to 6.7 percent from 5.9 percent previously," Nomura economists Sonal Varma and Aurodeep Nandi said.

At 6.7 percent, Nomura's new 2023-24 growth forecast is 20 basis points higher than the 6.5 percent projected by the government and the RBI, which is crucial as Nomura has been one of the most pessimistic about the growth trajectory. The Japanese investment bank still expects the GDP growth to slow down to 5.6 percent in 2024-25.

While Nomura's previous forecast was among the most pessimistic, State Bank of India, which expected growth to come in at 6.7 percent this year, is at the other end of the spectrum, revising its figure upwards by 30 basis points to 7 percent.

"Our optimism has been more than vindicated as we have been penciling growth during the current financial year sailing above the RBI projection at 6.5 percent for quite some time, despite the vagaries of climate and rain induced asymmetry seeping in of late," Soumya Kanti Ghosh, SBI's group chief economic advisor, said.

"We, as an institution, still believe in a strong India growth story with 2023-24 growth not less than 7 percent which may still go higher," Ghosh said.

"We got this 7.6 percent number about an hour or so ago. So we need to work out the numbers and see what kind of upside it imparts to the overall estimate for the year... We will do our homework and tell you in the next Monthly Economic Review how we see things," Nageswaran had said.

The finance ministry usually releases its Monthly Economic Review report in the third week of each month. However, the RBI may act before that.

According to Kaushik Das, Deutsche Bank's chief economist for India and South Asia, the RBI may raise its own growth forecast for the current financial year next week by 30 basis points to 6.8 percent.

"We think the RBI may raise its growth forecast for 2023-24, though only modestly," Rahul Bajoria, managing director and head of EM Asia (ex-China) Economics at Barclays, said. "The RBI's economic activity index now casts GDP growth of 6.3 percent in October-December, above the central bank's official projection of 6.0 percent, which suggests the bank is unlikely to be concerned about growth at this stage."

The RBI's Monetary Policy Committee will announce its next policy decision on December 8, with the central bank's growth and inflation forecasts being a part of the rate-setting panel's statement.