India's economy is set to exceed growth expectations, with the GDP growth rate for the first quarter of the fiscal year 2023-24 (FY24) projected to reach 8.3%, surpassing the Reserve Bank of India's (RBI) estimate of 7.8-8.0%.
This positive outlook was revealed in the latest report from the State Bank of India's Economic Research Department, SBI Ecowrap. The report also indicated that the overall growth for the entire fiscal year will outpace a predicted 6.5%.
The International Monetary Fund (IMF) had earlier forecasted India's growth at 6.1% for the year 2023. However, the recent SBI report highlights the country's resilient economic activity in the April-June quarter of FY24, predominantly propelled by growth in the services sector.
The report attributed the favorable performance to sustained manufacturing growth, reflected in key indicators such as the Index of Industrial Production (IIP), automobile sales, and PMI data.
Furthermore, strong agricultural sales and consistent power supply contributed to the robust economic momentum. The service sector also exhibited encouraging trends, with sustained passenger traffic and increased air cargo movement.
Indian corporations have also demonstrated commendable performance in the first quarter of FY24. Despite challenges, top-line growth averaged around 3%, and earnings before interest, taxes, depreciation, and amortization (EBITDA) and profit after tax (PAT) registered over 30% growth compared to the same period last fiscal year.
Notable sectors driving this growth include banking, automotive, information technology (IT), pharmaceuticals, fast-moving consumer goods (FMCG), and refineries.
The report acknowledged the re-emergence of inflationary pressures, primarily attributed to global disruptions and domestic factors. It emphasized the need for heightened vigilance by the government and the RBI in light of evolving inflation trends.
Although retail inflation is projected to remain high for the near future, concerns about food inflation are expected to abate. Disruptions on the global front, particularly in key food commodities such as cereals, pulses, and vegetables, have been significant contributors to India's inflationary pressures.