The estimated FY2024 real GDP at 7.3% implies 7% growth in 2HFY24, as against 7.7% in 1HFY24. We revise up our FY2024E real GDP growth estimate to 7% (from 6.8%), while retaining GVA growth at 6.7%. Headwinds to growth remain from weak consumption and moderation in global growth. We maintain our FY2025 real GDP growth estimate at 6.3%.
2HFY24 growth to be driven by investments; private consumption muted
The NSO estimates FY2024 real GDP growth at 7.3%, as against 7.2% in FY2023. With 1HFY24 GDP growth at 7.7%, the implied 2HFY24 GDP growth is at 7% (Exhibit 2). The key driver is expected to be investments (GFCF) at 11% growth (9.5% in 1HFY24). However, private consumption growth is expected to remain broadly unchanged at a muted 4.4% in 2HFY24 (1HFY24: 4.5%).
FY2024 real GVA growth estimated at 6.9%
The NSO estimates FY2024 real GVA growth at 6.9%, as against 7% in FY2023. Implied 2HFY24 growth is at 6.2%, given 7.6% growth in 1HFY24 (Exhibit 3). We maintain our FY2024E GVA growth at 6.7%, while awaiting quarterly releases and without major divergence from NSO’s estimate. The estimated difference of 60 bps between GVA and GDP growth is due to a favorable base effect for net indirect taxes (indirect taxes—subsidies). The net indirect taxes growth could be lower due to (1) lower-than-budgeted excise duty collections (likely shortfall of Rs360 bn) and (2) higher-than-budgeted subsidies in food and fertilizer (Rs200 bn higher). With a slightly lower net indirect tax growth, we pencil in FY2024E GDP growth at 7% (earlier 6.8%).
Nominal GDP growth expected at 8.9%
Nominal GDP growth is expected at 8.9%, implying a GDP deflator of around 1.6%. In absolute terms, nominal GDP is pegged at Rs297 tn (compared with FY2024BE of Rs302 tn). This will be the FY2024 GDP used in the FY2025 interim budget to be presented on February 1. With FY2024BE GFD at Rs17.9 tn, the GFD/GDP considering the FY2024AE nominal GDP will be at 6%, though we expect the government to restrict GFD/GDP to the budgeted 5.9%.
Revise up FY2024E real GDP to 7%; maintain FY2025E real GDP growth at 6.3%
We revise up our FY2024E real GDP growth to 7% (6.8% earlier) . While high frequency activity indicators remain resilient, headwinds to growth remain mainly from: (1) some fatigue in urban demand, which could be exacerbated by tightening lending regulations, while excess savings wane, fading momentum in formal employment and softening wage growth, (2) uncertain rural demand, (3) lagged impact of cumulative rate hikes and financial tightening and (4) moderation in global growth over the next few quarters. We maintain our FY2025E real GDP growth at 6.3%, assuming some global slowdown in 1HFY25, followed by recovery in global and domestic demand conditions (Exhibit 4). FY2025 growth will also be shaped by some easing in financial conditions, monsoon outlook and government’s capex (albeit at a much slower pace).