Mixed Expectations as India Awaits First-Quarter GDP Data Amid Economic Factors

The government’s release of GDP data for Q1 FY 2024-25 faces mixed expectations due to various economic factors, including recent heatwaves and upcoming elections. While analysts remain cautiously optimistic, the impact of weather, upcoming festive season, and RBI's policy decisions will be crucial in determining growth outlook.

As the government gears up to release GDP data for the first quarter (April-June) of FY 2024-25 on Friday, expectations are mixed, influenced by several economic factors. The latest figures are likely to reflect the impact of recent heatwaves and the ongoing election cycle, which may have moderated growth.

Nonetheless, a report by Equirus Securities shows analysts remain optimistic, emphasizing there are no definitive signs of a slowdown. Any temporary slowdown could reverse with favorable weather and the approaching festive season. The report states, 'While there are no signs of a slowdown, it could be a temporary holdup. However, prospects continue to look upbeat with macros holding up well.'

The report also highlighted the Indian economy's resilience, buoyed by stable macroeconomic indicators, including controlled twin deficits and adequate reserves. Despite challenges from climate conditions and external demand, the overall outlook remains positive. 'The temporary slowdown could well reverse with favorable weather and the festive season around the corner,' the report noted. The potential for a rebound in growth is strengthened by improving consumer sentiment and a recovering rural economy as food prices decrease and inflation moderates. Notably, improvements in unemployment in July and decreased demand for MNREGS activity suggest the rural economy is stabilizing.

Furthermore, the report pointed out that the GDP data release is pivotal, coinciding with the Reserve Bank of India's (RBI) upcoming policy meeting. The term of two external RBI members, known for their dovish stances, is ending, potentially influencing future monetary policy. Should they be replaced by more neutral or hawkish members, RBI's approach to rate cuts might change, possibly prolonging the pause on monetary easing.

'The term of three external RBI members is coming to an end. Their term ends on October 4th, while the next policy meeting is on October 9th. Note that Dr. Das's term also ends in December 2024. Therefore, any policy action may lie with the incoming governor in 2025,' the report added. While India's GDP data expectations are tempered by recent challenges, the general economic landscape remains promising. The intersection of seasonal factors, policy decisions, and external conditions will be vital in shaping India's future growth. As the data is made public, all eyes will be on how these elements converge to impact the country's economic outlook.

India's GDP exceeded expectations, standing at 7.8 percent in the January-March quarter. The full year 2023-24 GDP was revised upwards to 8.2 percent from the second advance estimate of 7.6 percent, according to the Ministry of Statistics and Programme Implementation. Real GDP reached Rs 173.82 lakh crore in 2023-24, compared to Rs 160.71 lakh crore in the previous year.

(With inputs from agencies.)