In Q2 FY24, Indian companies registered a 4% increase in revenue. However, notable growth in EBIDTA (66%) and PAT (31%) compared to Q2 FY23 was primarily driven by sectors such as banks, auto, capital goods, cement, electronics, power generation, real estate, FMCG, and others, as highlighted in the report.
The latest SBI Ecowrap report indicates that the GDP growth for Q2 FY24 is expected to range between 6.9% and 7.1%. Consequently, this would surpass the RBI's projections of 6.5% for the FY24 growth rate.
"In Q2, robust agriculture, strong services, substantial central and state capital expenditure (49% and 32% of budgeted, respectively), and increased consumption expenditure supported domestic economic activity," the report stated.
However, global growth concerns persist. The US labor market shows signs of weakening, with Non-Farm Payroll figures revised lower for 8 out of 9 months. The report suggests that as US consumers deplete around $1 trillion in excess savings, a frontloaded economic slowdown appears more imminent beyond 2024. Notably, with US elections in November 2024, the Democrats may prefer to avoid an economic downturn before the elections, making a frontloaded slowdown more likely.
The report highlights that in Q2 FY24, despite a 4% top-line growth, Indian Inc. showed significant EBIDTA and PAT growth of 66% and 31%, respectively, compared to Q2 FY23. This growth was driven by sectors like banks, auto, capital goods, cement, electronics, power generation, realty, FMCG, etc., indicating broad-based corporate strength.
Moreover, the report notes a positive weighted contribution of net exports in nominal GDP at 1.3% in Q1 FY24. In Q2 FY24, the goods trade deficit increased to $60 billion, while services trade surplus improved to $40 billion, resulting in a net exports deficit of goods and services at $20 billion.
In a year-on-year comparison, this represents a 55% increase from net exports in Q2 FY23, which had a deficit of $44 billion. As a result, the contribution of net exports to nominal GDP is expected to turn positive and rise in Q2 FY24 compared to Q1 FY24, potentially reaching around 2 percent.
GDP Growth Outlook
The Union finance ministry stated on Tuesday that the ongoing fiscal year is expected to conclude in line with projections, showcasing robust growth and macroeconomic stability. More than half of the current fiscal year has witnessed positive developments in the economy, as highlighted in the Monthly Economic Review for October. The ministry acknowledged that the persistent downside risk remains inflation, necessitating vigilance from both the government and the RBI.
According to research firm ICRA, the Indian economy is likely to have expanded by 7% in the second quarter of the current fiscal year, surpassing the projection of the Reserve Bank of India's rate-setting panel, as reported by the Economic Times. ICRA's report indicates a moderation in India's economic growth to 7% in the second quarter, following a 7.8% growth in the first quarter. This adjustment is attributed to a normalizing base and unpredictable monsoon patterns.
"Although the year-on-year growth in the remaining four indicators declined in Q2 FY2024 compared to Q1, all of them experienced double-digit expansion in the quarter. This includes CV registrations (+13.5%), cement production (+10.2%), states’ capital outlay and net lending (+33.5%), and the Government of India’s (GoI’s) capex (+26.4%)," noted ICRA in its statement.
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