Economy on a roll

Manufacturing and govt consumption key drivers, services lose steam

- PRIYANSH VERMA

• AT 7.6%, Q2 GDP GROWTH BEATS ALL ESTIMATES

INDIA'S GROSS DOMESTIC product (GDP) beat all estimates by a wide margin to grow at 7.6% in real terms in the September quarter (Q2FY24), with an unexpectedly solid push from manufacturing, a weak spot in the country's economic landscape for long, and investment support.Manufacturing grewan encouraging 13.9% in Q2FY24, though on a weakbase (-1.4%), thanks to a sharp sequential pick-up from 4.7% in the June quarter.

The headline GDP number, way higher than the Reserve Bank of India's (RBI) projection of 6.5% -- even the most optimistic forecasts hovered around 7% -- got backing from government consumption spending (up 12.4% on shrunken base), while private consumption, the largest part of the GDP,was muted (3.1%). There will, however, be a slowing of growth in the second half for cyclical and statistical reasons; the government stuck to the growth forecast of 6.5% for the current financial year.

Chief economic adviser V Anantha Nageswaran, however, said with the strong tax collection at buoyancy of nearly 2, 'the economy might be doing better than the current official estimates suggested'

"WE MIGHT BE understating India's growth rather than overstating it,"he said, adding that high-frequency indicators signalled 'a good start to Q3. India's growth prospects, he said, appeared bright though external factors posed a downside risk.

Key services industries, which, along with government spending, held the fort over many post-pandemic quarters, turned weaker in the September quarter. Mining and construction sectors, both large employment providers, remained robust in the September quarter, with year-onyear growth rates of 10% and 13.3% respectively.