GDP growth will likely moderate in the quarters ahead

New Delhi, Sep 1 (SocialNews.XYZ) Going ahead, GDP growth will likely moderate in the quarters ahead, Emkay Global Financial Services said in a report.

Falling income growth in the urban sector, shrinking corporate profitability, fading momentum in (front-loaded) government capex, demand-curbing monetary policies and diminishing global growth prospects may weigh on output, the report said.

Even as domestic activity is maintaining resilience, economic activity recovery is not yet broad-based. While rural income has remained tepid, urban employment growth has been steadily growing at a low rate and urban incomes will also likely ease ahead. This, in conjunction with the lagged effect of tighter monetary policy, will further curb domestic demand, the report said.

On the other hand, capex indicators are healthy with further improving capacity utilisation and signs of rising new project announcements. The domestic economy will also face challenges going forward, with higher global uncertainty, tightening global financial conditions, lower corporate profitability ahead and still-elevated inflation.

Economic growth of 7.8 per cent was in-line with market expectations in Q1FY24. Private consumption turned out to be the main driver while government consumption declined (0.7 per cent). Manufacturing growth did not move the needle while the contribution of agriculture fell. Headwinds in the form of global uncertainties and erratic weather conditions hinders growth forecasting for the rest of FY24, however growth is expected to taper from hereon, JM Financial Institutional Securities said in a report.

On the fiscal front, although an upside surprise (revenue) is unlikely but we believe that governments fiscal deficit target of 5.9 per cent is achievable in FY24. There’s a noticeable improvement in governments quality of expenditure during FYTD24. Our economic growth expectation for FY24 is pegged at 6.3 per cent, it said.

Source: IANS