Singapore-headquartered DBS Bank expects India’s economic growth to stay in the 7 percent handle in the April-June 2024 quarter. Thus, foreign bank also retained its India GDP growth forecast for current fiscal at 7 per cent.

“Stable global growth, public and household capex investments, rural recovery, a normal monsoon, and better composition of trade backs our optimistic view”, Radhika Rao, Senior Economist at DBS Bank said in a research note.

This came on the heels of the Central Statistics Office (CSO) on Friday last announcing that the country’s fourth quarter (Jan-Mar 2024) GDP rose 7.8 per cent year-on-year and economic growth for full fiscal 2023-24 grew at robust 8.2 per cent.

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“4QFY24 (i.e., 1Q24) real GDP growth rose 7.8 per cent yoy, exceeding market and our expectations, down from a revised 8.6 per cent yoy. On the supply end, GVA came in at 6.3 per cent yoy in the final quarter. The unusually large wedge between GDP and GVA (~150bp) boiled down to the sharp 22 per cent increase in net indirect taxes in the quarter. We note that on average this gap has been around ~30pp in most years”, Rao said.

High frequency data for April and May suggest the underlying growth momentum was positive, even as investments and government spending likely slowed ahead and during the various election phases, she added.

Exit polls point to Modi 3.0

Exit polls suggest that the incumbent National Democratic Alliance (NDA) will return to power with a clear majority for a third consecutive term, led by the Bharatiya Janata Party (BJP) which is expected to secure an absolute majority on its own count.

On average, polls point towards 350-370 seats for the NDA, leaving the opposition INDIA alliance with 140-150 seats. Exit polls have got the direction right in the past two rounds, said a DBS Research note.

DBS also highlighted that the actual margin of victory for NDA might be wider than what the polls suggest. This is given the tendency of exit polls to modestly underestimate the actual result in 2014 and 2019, it added.

Also this time around, the polling agency that correctly predicted the magnitude of victory of the coalition last time around is estimating ~400+ seats. Amongst the states, beyond the usual strongholds, the BJP appears to have made headway in AP, Karnataka, Odisha, West Bengal. Some ground might be lost in Haryana and Rajasthan, while UP offers a stronger footing.

“If these polls are matched with the actual count, this points to a strong pro-incumbency wave and showcases strong support for the ongoing policies by the country’s voters,” DBS note said.

Aside from political stability, the economic agenda is likely to be focused on the final budget in July in the near-term and further out on capex commitments, fiscal consolidation, and reforms targeted at the factors of production. Onshore markets are likely to welcome this outcome, marked by small gains on the rupee, equity markets, while 10Y yields stay below 7 per cent, according to Rao.

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