The growth rate in the fourth quarter is likely to moderate on a quarterly basis as the gulf between gross domestic product (GDP) and gross value (GVA) is unlikely to be as high as in the third quarter.

India Ratings and Research — a Fitch group company — expects the country’s GDP growth rate for the March quarter at 6.7 per cent and around 6.9-7 per cent for the 2023-24 fiscal, its principal economist Sunil Kumar Sinha said.

This is sharply lower than the third quarter growth of 8.4 per cent that took analysts by surprise but was attributed to high tax collections that drove a wedge between the growth rates of GDP and GVA, which was much lower at 6.5 per cent.

The GDP numbers for the fourth quarter (January-March 2024) and the provisional estimates for the 2023-24 fiscal are scheduled to be released by the government on May 31.

“When we analyse the data, then what is visible is the wedge between the GVA and GDP. A large impetus to Q3 GDP has come from higher tax collection, but this phenomenon is unlikely to be repeated in the fourth quarter. The wedge between the GDP and GVA is unlikely to be repeated in the fourth quarter,” he noted.

In the first quarter, the GVA and GDP growth was 8.2 per cent, while in the second quarter, the GVA was 7.7 per cent and GDP 8.1 per cent.

GDP is the total value of goods and services produced in a given period. GVA is GDP minus net taxes (gross tax collection minus subsidy).

He said the growth rate in the first two quarters benefited from a low base, though the 8.4 per cent growth rate in the third (October-December 2023) quarter was surprising.

The Reserve Bank, in its monetary policy review in April, projected GDP growth for 2023-24 at 7 per cent.

As regards the economic growth in the current fiscal, Sinha said the GDP is expected to expand at 7.1 per cent.

“Even if we set aside the tax component, the momentum witnessed in the first and second quarters has continued in the subsequent quarters, and the likelihood is that momentum will continue in 2024-25,” he added.

The services sector, he said, will continue the momentum, led by construction and electricity, while mining and industrial output will be the laggards.

“The prediction of above normal monsoon (by the Indian Meteorological Department), if it turns out to be true, will see some revival in rural demand, which will support consumption demand, and make it broad-based, instead of skewed currently,” Sinha said.