India: Strong growth print and implications
India grows at a strong beat.
Group Research - Econs, Radhika Rao1 Mar 2024
  • Three developments are discussed in this note.
  • Firstly, India’s Oct-Dec23 real GDP growth surged to 8.4% yoy, diverging from GVA
  • Second, the ‘Goldilocks’ economic backdrop could delay the easing cycle.
  • Third, the recently released household expenditure survey sheds light on to the Indian consumer
  • Implication for forecasts: We dial up our FY25 GDP forecast and pare rate cut expectations.
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#1 Key takeaways from the 3QFY24 (Oct-Dec23) growth numbers

India’s 3QFY24 (Oct-Dec23) real GDP surpassed expectations to grow by 8.4% yoy (consensus at 6.6%). This was accompanied by revisions to the 1Q and 2QFY24 prints to 8.2% and 8.1%, up from 7.8% and 7.6% respectively. This diverged sharply from the supply side measure of GVA (gross value added) output. GVA moderated along expectations to 6.5% yoy vs the revised 7.7% in the quarter before.

Dialling up the FY25 growth forecast

The Indian economy has exhibited notable resilience so far and is expected to extend its firm run into the next year. We dial up our GDP growth estimate for FY25 to 6.5% yoy vs 6.2% earlier and GVA at 6.4%. This upward revision is driven by four forces.

#2 Will ‘Goldilocks’ delay the easing cycle?

Thursday’s strong growth numbers align with the monetary policy committee’s (MPC) optimism on growth but are also likely to leave them cautious on an eventual liquidity and rate pivot.

#3 Key takeaways from the recently released consumption spending survey

The Household Consumption Expenditure Survey (HCES) survey was conducted after a 11-year gap by the NSSO and MOSPI between August 2022 and July 2023, with the key objective of getting updated trends of the monthly per capita consumption expenditure (MPCE) across the country. We highlight key takeaways from the survey in the PDF and associated charts.

Macro impact of the survey: The impact and relevance of this survey will be notable for a revisit to the current inflation basket composition and consumption breakdown. Based on the current findings, the share of food will likely be lower by 30-40bp, from 46% to 41-42%. That said, a change in the CPI basket is not imminent. Authorities plan to conduct further rounds of the survey (one is underway) and before considering a revision of the CPI composition. The latter is more likely next year. Despite the marginal correction in the share of cereals and vegetables, readings are likely to stay relatively volatile. For policy, the higher share of non-food categories suggests the focus on ‘core’ segments will remain.

To read the full report, click here to Download the PDF.  

Radhika Rao

Senior Economist – Eurozone, India, Indonesia
[email protected]

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