Data released by the National Statistical Office (NSO) on Thursday showed gross domestic product (GDP) rose 7.6% in the July-September period, the second quarterof the 2023-24 fiscal year, higher than 6.2% in the same year-ago period and marginally lower than 7.8% recorded in the April-June period.The second quarter performance beat market expectations and was higher than RBI’s estimate.
India to remain fastest growing major economy
The strong numbers for the second quarter also help India remain the fastest growing major economy in the world. Several multilateral agencies have raised their growth estimates for the current financial year citing resilient domestic demand.
The finance ministry said growth prospects appear bright, though external factors pose a downside risk, but pointed out that the July-September quarter numbers “pose a certain upside” to the 6.5% GDP growth estimate for the current financial year.
The manufacturing sector rose at a nine-quarter-high of 13.9%, higher than the previous quarter’s 4.7% and above the contraction of 3.8% in the second quarter of last year.
The construction sector, which has been on an upswing since the lifting of the Covid induced curbs, grew 13.3% during the quarter while mining, electricity, gas, water supply and other utility services posted double-digit growth. The farm sector and the services sector slowed, posing some worries as patchy monsoon rains weighed on the agriculture segment, which posted its slowest growth in over four and a half years.
“India’s GDP growth came much higher than expected at 7.6% in Q2 FY24, driven by significant acceleration in manufacturing and construction sector activities,” said Rajani Sinha, chief economist at ratings agency CareEdge, adding that growth was boosted by investments and higher government consumption.
But experts said that going forward the economy will face several challenges, including the tough geopolitical situation, upcoming general elections, prospects of slowing global trade growth and the trajectory of inflation.
“Looking ahead, we project GDP growth to moderate significantly in H2 FY2024, with the continuing headwinds such as the normalising base, weak outlook for agri output and rural demand, tepid global growth…,” said Aditi Nayar, chief economist at ICRA.
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