DBS Group sees India GDP growth at 7.1% in 2024

Singapore-headquartered DBS Group expects  India’s GDP growth to moderate, but stay resilient at 7.4 per cent in April-June 2024. For the entire calendar year 2024, DBS Group has now pegged the GDP growth estimate at 7.1 percent. 

In January-March 2024, GDP growth had touched 7.8 per cent, led by non-farm output and investment growth. 

The modest slowdown in GDP growth in April-June 2024 is mostly led by deterioration in industrial production, credit, freight traffic and government capital expenditure, according to DBS Group’s Nowcast.

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Meanwhile, farm tractor, commercial vehicle sales and external trade in goods and services likely improved during the April-June quarter. “Based on a firm 1Q (Jan-Mar) and 2Q24(April-June) reading in calendar year 2024, we expect full year growth at 7.1 percent in CY24”, Radhika Rao, Senior Economist, DBS Group Research said. 

DBS Group’s growth forecast of 7.4 per cent for April-June 2024 quarter is higher than the Reserve Bank of India’s (RBI) GDP growth projection of 7.3 percent for this quarter. 

Meanwhile, DBS Group Research said it does not expect an increase in the scale of borrowings via-a-vis what was outlined back in the interim budget. It highlighted as to how onshore markets are focused on the start of the bond index inclusion later this week and likely timing of the final budget next month. 

Debt markets have taken a bigger piece of the action attracting $7.7 billion in inflows in 2024 yet far as investors front run the index inclusion. “Beyond the index inclusion, supply -demand dynamics will be under watch when the FY25 Budget is tabled”, Rao added. 

On India‘a current account deficit narrowing to - 0.7 percent of GDP ($23 billion) from -2.0 percent of GDP ($67 billion) in FY23, Rao said that it was shade better than DBS Group forecast of -0.8 percent.

This follows current account surplus of $ 5.7 billion (+0.6 percent of GDP) in the last quarter of FY’24 (Jan-Mar 2024), driven by an improvement in the goods trade balance and a stronger pickup in the services trade surplus. 

This year (FY25), the current account deficit is expected to widen to -1 -1.2 percent of GDP, factoring in a wider trade deficit and flatter service receipts, but financed well by strong portfolio flows and loans under the financing item, DBS Group has said. 

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Meanwhile, Joanne Goh, Senior Investment Strategist, DBS Bank, said that the incumbent NDA coalition is expected to follow through with policies that were kickstarted in the previous term, including expanding the manufacturing footprint and capex push.

“With much of the recent emphasis on supply-driven reforms, we think authorities may begin to explore consumption driven stimulus,” Goh said.

 With the near doubling of public capex in the government’s agenda, capex recovery is likely to continue driving economic and corporate earnings growth for equity markets in the near future, Goh added.