LOW AGRI, SERVICES, PVT FINAL CONSUMPTION GROWTH A WORRY FOR ECONOMISTS, ANALYSTS

India’s double-engine fired growth of 7.6 per cent in the July-September quarter of FY2023-24 led by a stronger manufacturing and construction output growth (on the supply side) and on the demand side a robust pickup in fixed investment and government consumption amidst global conflicts, supply chain disruptions and economic slowdown has defied expectations with industry, analysts and experts clutching at various rationale behind this performance.

While India’s economy had grown 7.8 per cent in the April-June 2023 quarter, the Q2FY24 figures came as a sharp acceleration from the 6.2 per cent in the corresponding quarter of FY23. The Reserve Bank of India projected a modest 6.5 per cent for Q2FY24.

There were expectations of a slowdown in India’s growth in the second half, according to Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers, and as Senior Economist, DBS Group Research Radhika Rao points out, there was consensus on GDP increase of 6.7 per cent. Defying forecasts, manufacturing sector growth shot up to a nine-quarter high of 13.9 per cent in Q2 from 4.7 per cent in Q1FY24, leading to a surge in the Q2 growth. A double-digit growth in core industries output, strong recovery of industry and fixed investment pushed the better-than-expected growth during the quarter despite disappointing performance by private consumption and services activities. “This should instill confidence in the domestic economies ability to expand and outperform other major economies, amidst global headwinds,” adds Hajra.

Indeed, as the NSO data suggests, the manufacturing sector performance has been helped by a double-digit growth of 12.1 per cent in key infra sectors as against 0.7 per cent expansion in the year-ago period. There was a sharp uptick of 17.1 per cent in cement production, 20.3 per cent in electricity production and 11.0 per cent in steel production, signalling a strong momentum in the economy, built largely on robust domestic demand.