Higher-than-expected GDP may lead to tight monetary policy from RBI for a longer period

New Delhi, Feb 29 – The higher-than-expected momentum in the economy may lead to a tight monetary policy from the RBI for a longer period, and any reversal in the current stance is unlikely over the next six months, said Suman Chowdhury, Chief Economist and Head of Research at Acuite Ratings.

The second advance estimates of GDP for FY24 released by the National Statistics Office (NSO) has indeed sprung a major surprise in the markets. The GDP growth for Q3FY24 is pegged sharply higher at 8.4 per cent, as compared to the consensus estimate of 6.6 per cent, Chowdhury said.

“Further, the GDP estimates for the current year has been further revised to 7.6 per cent, which is again significantly higher than our forecasts of 6.8 per cent. One of the key reasons for the material shift in the GDP print is the revisions in the GDP data for some quarters of the previous fiscal,” Chowdhury said.

“What is noteworthy is the significant differential between GVA (6.5 per cent) and GDP (8.4 per cent) growth in the third quarter,” Chowdhury said.

The manufacturing sector has grown by 11.6 per cent YoY in Q3FY24, which may be partly due to higher operating margins driven by lower raw material costs.

Expectedly, the services sector has seen a significant uptick, but the agricultural sector has seen a modest contraction of 0.8 per cent during the quarter.

Importantly, private consumption growth has been sluggish at 3.6 per cent and in the context of high GDP growth, it remains an area of concern, Chowdhury added.


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