Economy exhibits resilience despite external headwinds

Weak data on private consumption raise questions

- PRIYANSH VERMA

AT A TIME when the global economy is still facing uncertainties, with growth decelerating in some of the most advanced economies, India's economy has exhibited resilience and has been able to grow at a rate much higher than market expectations.

Key macro-indicators such as consumer price index (CPI) inflation, wholesale price index (WPI) inflation, trade and current account deficit (CAD) are benign, and are expected to remain range-bound in the near-term as well.

In the first three quarters of FY24, the country's gross domestic product (GDP) expanded sharply by 8.2%, with the growth in Q3 coming in at a six-quarter high of 8.4%.

This is way higher than the market consensus of 6.7%. Of course, the base effect helped, but largely the push to growth came from investments.

"The breakdown (of Q3 GDP data) revealed a robust manufacturing push compared to farm output, urban spending outpacing rural demand, and investment growth spurred by frontloading of central AT EAR and state capital spending, along with households' capital expenditure," said Radhika Rao, senior economist, DBS Group Research.

AS 24 Apart from the Centre's capital expenditure on railways, roads & highways, defence, and transfer to states, which has been ongoing, the current year has also seen a pickup in residential construction, which has been a backstop for noncorporate private capital expenditure, economists say.

Notably, the share of grossfixed capital formation (GFCF) - a proxy for investments in the economy - is expected to rise to