Domestic rating agency ICRA has adjusted its GDP growth projection for the fiscal year 2024, increasing it to 6.5% from the previous estimate of 6.2%. This update, however, remains below the Reserve Bank of India’s (RBI) more optimistic 7% GDP growth forecast for the current fiscal year.
Reasons for Revision
ICRA cites expectations of sustained deflation in commodity prices and anticipates improved growth in the October-December period, surpassing previous estimates. The agency notes a festive-driven increase in volume growth in high-frequency non-agri indicators, as indicated by the ICRA Business Activity Monitor in October-November 2023 (11.3% versus 9.5% in Q2 FY24).
The agency highlights the continued stability of global commodity prices in the ongoing quarter, attributing it to concerns about growing demand from China, ample supplies for commodities like crude oil, and the normalization of supply chains.
While October and November witnessed heightened activity, ICRA reports mixed early trends for December. These include a moderation in electricity demand growth, an increase in daily vehicle registrations, and a contraction in diesel sales.
Comparison with RBI Estimate
Despite the upward revision, ICRA’s forecast of 6.5% for FY24 GDP growth remains notably lower than the RBI’s more optimistic projection of 7%. The differing outlooks suggest variations in assessments of economic performance and contributing factors.
Questions Related to Exams
Q: Why did ICRA revise its FY24 GDP growth forecast?
A: ICRA revised the forecast to 6.5% from 6.2%, citing sustained deflation in commodity prices and anticipating better growth in the October-December period.
Q: How does ICRA’s revised estimate compare to the RBI’s projection?
A: ICRA’s 6.5% forecast is lower than the RBI’s optimistic 7% GDP growth estimate for the current fiscal year.