India's GDP growth may have moderated to 6.5% in October-December

India's GDP growth likely declined to 6.5 percent in October-December 2023 from 7.6 percent the previous quarter, a Moneycontrol survey of 10 economists showed.

India's GDP had grown just 4.5 percent in the third quarter of 2022-23.

The statistics ministry will release GDP data for October-December 2023 at 5:30pm on February 29. It will also release its second advance growth estimate for 2023-24 as a whole, as well as the first, second, and third revised estimates of growth for 2022-23, 2021-22, and 2020-21, respectively.

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In its first advance estimate, the statistics ministry had pegged GDP growth for the current financial year at 7.3 percent. Economists polled by Moneycontrol see this being lowered to 6.9 percent in the second advance estimate.

According to Aditi Nayar, ICRA's Chief Economist, "lower volume growth for the industrial sector, flagging momentum in certain indicators of investment activity, slowdown in government expenditure, and an uneven monsoon," are seen to be dragging growth down sharply in the final quarter of 2023.

Nayar expects the growth rate at a lower-than-consensus 6.0 percent.

While output growth may have slowed down in October-December, corporate margins may have actually improved in segments such as iron and steel, capital goods, textiles, and construction, thanks to falling input costs.

Among the other key sectors, agricultural growth may have accelerated to more than 2 percent after clocking an increase of just 1.2 percent in July-September — the lowest in four-and-a-half years. Services, too, are seen to be posting higher Gross Value Added (GVA) growth compared to 5.8 percent in July-September.

"For services, a delayed festive surge and the World Cup brought about broad-based improvement in October-December, clocking 6.7 percent growth," said Jahnavi Prabhakar, an economist at Bank of Baroda.

India hosted the 2023 cricket ICC World Cup from October 5 to November 19.

On the investment front, while the Centre's capex growth edged down marginally to 24.4 percent year-on-year (YoY) in October-December from 26.4 percent in July-September, "the capital outlay and net lending of 25 state governments shrank 3.9 percent YoY, after having surged 42.4 percent in Q2 2023-24," Nayar noted.

While the headline GDP growth figure is seen to be moderating, it "should be seen in the context of elevated growth of 7.7 percent in the first half of 2023-24," said Rahul Bajoria, Managing Director and Head of EM Asia (ex-China) Economics at Barclays.

The blockbuster 7.6 percent growth recorded in July-September resulted in a raft of upward revisions in growth forecasts for 2023-24, including by the Reserve Bank of India (RBI), whose 'nowcast' — a more frequently updated forecast made using high-frequency data — pegs the third quarter growth rate at 7 percent.