A report released by ICRA Ratings forecasts a surge in India’s economic growth during the April-June quarter of the current fiscal year. The growth is predicted to accelerate from 6.1% in the January-March quarter to 8.5%. ICRA attributes this rapid increase to a recovering services sector and a strong foundation in place.
According to Ms. Aditi Nayar, ICRA’s Chief Economist, the projected growth surpasses the RBI’s expectation of 8.1%. However, she cautions that challenges are anticipated in the second half of the fiscal year, which could act as a dampening factor.
Nayar highlights various factors that contributed to the growth in the June quarter. These include the continued uptick in demand for services, improved investment activity—particularly government capital expenditure being front-loaded—and significantly lower commodity prices that facilitated margin expansion in select industries.
The agency’s analysis indicates that due to robust year-over-year growth in key investment-related indicators, the expansion of gross fixed capital formation (GFCF) in the first quarter of FY24 is expected to be in double digits.
During the same period, the Indian government’s gross capital spending surged by 59.1% to Rs. 2.8 lakh crore (US$ 34 billion). Additionally, the combined capital outlay and net lending of 23 state governments (excluding certain states) jumped by an impressive 76% to Rs. 1.2 lakh crore (US$ 14 billion) in Q1 of FY24.
The report also highlights the growth of capex-related external commercial borrowings for purposes such as modernization, new projects, local capital goods purchases, and imports. The borrowing increased to US$ 13.0 billion in Q1 from US$ 9.6 billion for the entire FY23.
The estimated growth in gross value-added for the services sector climbed from 6.9% in Q4 of FY23 to 9.7% in Q1 of FY24. Moreover, 11 out of 14 high-frequency indicators linked to the services sector exhibited growth during the quarter.
