In a surprise, India’s gross domestic product (GDP) in the July-September 2023 quarter stood at 7.6 per cent y-o-y, surpassing all estimates, including that of the RBI MPC. It is also way higher than the 6.2 per cent economic growth recorded in the corresponding period last year. Here’s how India’s Q2 GDP crossed all expectations:
Manufacturing/ industrial output: The surprise was largely led by the manufacturing sector, with growth surging to a nine-quarter high of 13.9 per cent in Q2 from 4.7 per cent in Q1.
Aditi Nayar, chief economist and head (research and outreach) at ICRA, said, “The growth in manufacturing sector was led by a favourable base, an uptick in volume growth and an improvement in profit margins owing to continued deflation in input prices.”
Construction sector: The growth in the construction sector also surprised on the upside, even as the mining and electricity, gas, water supply and other utility services witnessed a double-digit expansion in the quarter, along expected lines, amid a similar growth in volumes of these segments, as reflected in the IIP data, Nayar said.
Gross Fixed Capital Formation: GFCF, which is an indicator of investment activity in the country, jumped 11.04 per cent to Rs 14,71,938 crore during the September 2023 quarter. GFCF accounts for 35.3 per cent of the GDP.
Sujan Hajra, chief economist & executive director at Anand Rathi Shares and Stock Brokers, said, “On the supply side, industrial activity has been the biggest surprise; while on the demand side, investment and government final consumption have surprised pleasantly.”
ICRA’s Nayar said the investment rate, measured as the nominal GFCF-to-GDP, inched up to 30 per cent in Q2 FY2024 from 29.1 per cent in the year-ago quarter. “This was the highest investment rate in any Q2 since Q2 FY2015.”
Government final consumption expenditure: On the expenditure side, GFCE also witnessed a double-digit growth during the July-September 2023 quarter.
Exports Growth: Another positive feature of 2QFY24 is exports of goods and services, which grew 4.3 per cent y-o-y as against a contraction of 7.7 per cent y-o-y in the previous quarter.
Sunil Kumar Sinha and Paras Jasrai, analysts at Indian Ratings & Research, said, “A positive exports growth despite the geopolitical situation indicates resilience especially of the services which have been providing a stable hedge against the rising goods trade deficit.”
After the impressive economic performance in Q2, analysts have revised upwards their full FY24 GDP forecasts. Ratings agency ICRA has raised its FY24 GDP forecast from 6 per cent to 6.2 per cent, while brokerage firm Anand Rathi increased its GDP estimate for the full FY by 20 basis points to 6.4 per cent.
India’s GDP grew 7.6 per cent y-o-y during the July-September 2023 quarter (Q2 FY24) as compared with the 6.2 per cent growth recorded a year ago, according to the latest official data released on Thursday. The Q2 FY24 GDP growth is more than what was expected by analysts.
For Q2 FY24, analysts had expected a GDP growth between 6.5 per cent and 7.1 per cent year-on-year (y-o-y). The 7.6 per cent Q2 FY24 GDP growth is also way higher than the RBI MPC’s estimate of 6.5 per cent last month.
India’s economy had grown 7.8 per cent in the April-June 2023 quarter.
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