Barclays hikes India GDP growth forecast for FY24 to 7.8% after blowout Q3 data

Barclays has raised its GDP growth forecast for India for 2023-24 by a massive 110 basis points to 7.8 percent, while the bank’s economists also revised upward their prediction for 2024-25 by 50 basis points to 7 percent. One basis point is a hundredth of a percentage point.

The huge improvement in the growth outlook for India by Barclays comes after the release of blowout GDP numbers for October-December 2023 on February 29, with the statistics ministry estimating an astonishing 8.4 percent growth in the economy. This was sharply higher than the general expectation of a 6.5 percent growth rate and 6.7 percent by Barclays.

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“Considering today’s print and strong momentum put up by growth numbers across Q1-Q3 of 2023-24, we raise our 2023-24 GDP growth forecast to 7.8 percent with upside risks given Q1-Q3 2023-24 growth is currently averaging 8.2 percent,” Rahul Bajoria, managing director and head of EM Asia (ex-China) Economics at Barclays, said in a note late on February 29.

“We also raise our forecast for 2024-25 GDP growth to 7.0 percent from 6.5 percent earlier. We expect the steady domestic growth momentum to continue, supported by continued increases in government capex, much anticipated rising private investment, and monetary easing,” he added.

In addition to the blockbuster October-December number, the statistics ministry also made upward revisions to the first and second quarter growth numbers to 8.2 percent and 8.1 percent, respectively, resulting in a second advance estimate of growth for the full year of 7.6 percent – even higher than its first estimate of 7.3 percent that had stumped economists.

Barclays’ growth forecast for 2024-25, at 7.0 percent, is now in line with that of the Reserve Bank of India (RBI). And Bajoria thinks the impressive GDP numbers could end up resulting in the Indian central bank’s Monetary Policy Committee (MPC) leaving the interest rates higher for even longer as there is “little urgency” to lower them.

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“In our view, four members of the MPC remain hawkish as per the February meeting and solid growth will buy them more time to wait and watch data on inflation, especially on food,” Bajoria said.

Consequently, Barclays has pushed back its rate cut call to July-September from April-June.

On February 8, the MPC left the policy repo rate unchanged at 6.5 percent for the sixth time in a row.