High-frequency indicators continue to point to resilience in economic activity, according to Kotak Securities. However, headwinds to growth loom large from continued weak rural demand, which can be exacerbated in the case of adverse rainfall impacting winter crops; muted overall consumption growth in the near term, which can be further impacted by the higher risk weights on key credit segments; the lagged impact of cumulative rate hikes and financial tightening; and moderation in global growth over the next few quarters, leading to some pressure on manufacturing and exports.
Factoring in the latest print as well as a better-than-expected global growth outturn, we raise our FY2024E real GDP growth to 6.8% from 6.2% earlier, with 2HFY24E growth at 6% from 5.7% earlier, Kotak said.
“We maintain our FY2025E real GDP growth at 6.3%, assuming some global slowdown in 1HFY25 followed by recovery in both global and domestic demand conditions,” the note stated. Growth prospects in FY2025 will also be shaped by some easing in financial conditions, a normal monsoon/agriculture sector outlook, and the continuation of the government’s capex, albeit at a much slower pace, it explained.
