India’s Q4 GDP growth to dip to 4-quarter low of 6.7%: ICRA

India's GDP growth on a year-on-year basis is projected to dip to a four-quarter low of 6.7% in Q4 FY2024 from 8.4% in Q3, according to the latest estimates by ratings agency ICRA. Further, growth in the gross value added (GVA) is estimated to ease to 5.7% in Q4 FY2024 from 6.5% in Q3 FY2024, driven by the industrial and services sectors.

Defying all estimates, India’s economy had grown to a six-quarter high at 8.4% in Q3 FY24 and exhibited over 8% growth in the preceding two quarters. 

The ICRA estimates suggest the agricultural GVA is expected to contract for the second straight quarter in Q4 FY2024 (-0.5%), at a pace similar to Q3 (-0.8%), amid weak trends in the rabi output (barring wheat) and concerns related to yields.

Further, the gap between the GDP and the GVA growth is likely to moderate to around 100 basis points (bps) in Q4 FY2024 from the particularly high 185 bps in the previous quarter, says the ratings agency. "This is on account of an expected lower expansion in the net indirect taxes in Q4 owing to a narrower dip in the subsidy outgo (-22.8% in Jan-Feb 2024; -53.6% in Q3FY2024)." 

For the full-year FY2024, ICRA expects the GDP and GVA growth to print at 7.8% and 7.0%, respectively, unless the growth for M9 FY2024 is revised.

“Lower volume growth coupled with diminishing gains from commodity prices dampening the profitability of some of the industrial sectors is expected to dampen India’s GVA growth in Q4 FY2024,” says Aditi Nayar, chief economist, head-research & outreach, ICRA. She adds that notwithstanding the overhang of the "unfavourable" 2023 monsoon rains on agri output, there are some green shoots suggesting that a nascent revival in rural demand may be on the anvil. 

"The domestic retail tractor volumes reverted to a YoY expansion of 7.7% in Q4 FY2024, after contracting by 4.0% in Q3 FY2024. Moreover, some listed FMCG players pointed to a recovery in the rural economy, particularly in the non-food segment, in Q4 FY2024. This can be partly attributed to the uptick in demand during the marriage season as well as a low base. Additionally, urban consumption is expected to have remained robust, albeit uneven in Q4 FY2024,” adds Nayar.

In terms of investment, ICRA says activity was healthy in Q4 FY2024, amidst a mixed trend, displayed by various investment-related lead indicators. 

Another ratings agency, India Ratings and Research also expects the country's GDP to grow at 6.2% in Q4 and 6.9%-7% in the full fiscal year 2024-25. The government will announce the fourth quarter (January-March) GDP numbers and the provisional forecast for FY2023-24 on May 31, 2024.