Indian credit rating agency ICRA has projected the country’s gross domestic product (GDP) growth to moderate sequentially to 6 per cent year on year (YoY) in the third quarter (Q3) of fiscal 2023-24 (FY24) compared to 7.6 per cent in Q2.

Aditi Nayar, chief economist, head of research and outreach at ICRA, in a recent report attributed lower volume growth for the industrial sector, flagging momentum in certain indicators of investment activity, a slowdown in government expenditure and an uneven monsoon for the projection.

Total government spending contracted by 0.2 per cent in 25 states in the previous quarter, and this may have dulled the growth of gross value added (GVA) growth, ICRA noted.

The GVA growth may ease to 6 per cent in Q3 FY24 from 7.4 per cent in Q2 due to a slowdown in industrial and agricultural sectors, amidst an improvement in the services sector.

Spending had expanded by 12.1 per cent and 18.3 per cent respectively in year-on-year (YoY) terms in Q1 and Q2 of FY24.

"Moreover, the combined revenue expenditure of the aforesaid 25 state governments witnessed a lower YoY growth of 7.5 per cent in Q3 FY2024, compared to 10.7 per cent in Q2 FY2024," the report said.

The index of industrial production (IIP) for manufacturing reflected a deceleration in volume growth. The projected GVA expansion for manufacturing is at a healthy 10 per cent in Q3, which is twice as high as the 4.7 per cent recorded in Q1 FY24, but lower than the 13.9 per cent recorded in Q2.

The report also noted an easing in the YoY growth of nine of the 11 investment-related indicators, which led to a moderation in the country’s investment activity in Q3 FY24.

The industrial GVA growth is expected to record a broad-based moderation to 8.8% per cent in Q3 FY24 from 13.2 per cent in Q2, ICRA added.

Fibre2Fashion News Desk (DS)

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