India's economy to expand at 8.3% in first quarter of current financial year: SBI Research

State Bank of India's Economic Research Department has pegged that India's economy is likely to grow at 8.3 per cent in the first quarter of current financial year as global economic activity remained resilient. The estimate by the country's largest bank comes days ahead of official data will be reported by the government on August 31.

"On the basis of the ANN model, we forecast that the quarterly GDP growth for the Q1FY24 would be at 8.3 per cent. Given that the GDP deflator at -0.6 per cent (due to negative WPI), we expect nominal GDP growth at 7.7-7.8 per cent for Q1 FY24. This the first time since Q4 FY19, when nominal GDP growth is expected to be less than the real GDP growth," SBI report authored by Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India said.

Capital expenditure grows in double digit

The report said that there has been a surge in capital expenditure in the first quarter of the current financial year with the central government spending 27.8 per cent and state governments spending 12.7 per cent of budgeted estimates.

"States like Andhra Pradesh, Telangana, Madhya Pradesh where elections are due have registered capital expenditure growth up to 41 per cent," SBI report noted.

Strong corporate earnings

Highlighting robust performance by Indian corporates SBI Research said that Indian Inc. reported top line growth of around 3 per cent while earnings before interest, taxes, depreciation, and amortization (EBIDTA) and profit after tax (PAT) grew by more than 30 per cent, as compared to Q1FY23, contributed by sectors like banks, auto, IT, pharma, FMCG, refineries etc. 

Corporate results, for Q1FY24, ex BFSI, represented by more than 3,000 listed entities showed almost flat topline. However, EBIDTA and PAT grew by 23 per cent and 33 per cent respectively as compared to same quarter last year.

SBI Research added that corporate margin, which was under pressure for last few quarters, has shown sign of improvement since last quarter of financial year 2023. EBIDTA margin, on aggregate basis of more than 3,000 companies, improved by 274 basis points to 15.81 per cent first quarter as compared to 13.07 per cent in the previous quarter and 12.60 per cent in the year ago period, contributed by low input prices.

Resilient banking sector

SBI Research also highlighted the strong performance of the banking sector saying that credit growth continued to grow in double digits and has become broad based across sectors. 

“All Scheduled Commercial Bank's (ASCB’s) credit growth (y-o-y) has been accelerating since early 2022. In 2023-24 (up to 28 July), ASCB’s deposits grew by 12.9 per cent (last year 9.2 per cent), and credit grew by 19.7 per cent (last year: 14.5 per cent),” SBI Research said.

“Despite rising interest rates, the overall economic growth led to higher credit demand leading to banks reporting a robust rise in advances. Both the public sector banks (PSBs) and private sector banks logged in equal pace of loan growth during first quarter. All the major financial parameters viz., credit deployment, profitability, asset quality, capital adequacy etc. indicate that the performance of PSBs has significantly improved. They’re adequately capitalised, resilient, and have sound financial health. In first quarter, PSBs declared net profit of Rs 34,418 crore and seem likely immune to any visible macroeconomic shock while being ready to anchor credit needs,” SBI’s report added.