India’s Economic Landscape: Strong GDP Growth Spurs Optimism Amid Divergent Forecasts for 2023-2025

India’s GDP for the September quarter exhibited a robust growth of 7.6% from the previous year, surpassing the estimated range of 6.8-7%. V Anantha Nageswaran, the Chief Economic Advisor, anticipates an upside to the 6.5% GDP forecast for the year, asserting that the growth momentum will persist into the December quarter. Notably, Nageswaran suggests that India might be downplaying its economic growth, citing the high tax buoyancy.

Goldman Sachs adjusted India’s 2023 growth forecast upward by 20 basis points to 6.7% year-on-year, while maintaining the 2024 forecast at 6.2%.

However, the financial outlook for 2024 received a boost from Citi, which increased its GDP forecast by 50 basis points to 6.7%. Citi’s analysis highlights two prevailing trends: investment outpacing consumption and a two-paced growth momentum.

In terms of policy expectations, Citi anticipates the Reserve Bank of India to maintain a status quo on interest rates and uphold the stance of “Withdrawal of Accommodation” in the upcoming December policy meeting.

Morgan Stanley is optimistic about India’s economic trajectory, raising its financial year 2024 growth forecast to 6.9%, driven by robust domestic demand. Looking ahead to the financial year 2025, Morgan Stanley maintains its estimates at 6.5%.

State Bank of India raised its GDP forecast for the financial year 2024 to 7%, up from the previous 6.7%. Axis Capital also revised its estimates to 6.7%, emphasizing potential upside risks.

On the contrary, HSBC expresses caution, suggesting that growth could soften due to factors such as weaker FDI inflows, anticipated credit growth softness, and normalizing base effects in the coming months.

India’s GDP expanded by 7.6% in Q2, FY24, with robust growth in various sectors: Manufacturing surged by 13.9%, Construction by 13.3%, Mining by 10%, Electricity by 10.1%, Services & Public Administration by 7.6%, Real Estate & Finance by 6%, Trade and Hotels by 4.3%, and Agriculture by 1.2%. Notably, Manufacturing experienced a significant jump from a mere 4.7% in the previous quarter.