“Given the higher than forecast outcome for Q2, we are revising our FY2024 growth forecast to 6.2% from 6.0%,” said Aditi Nayar, chief economist, Icra.
The growth in the second quarter is just a shade below the 7.8% growth registered in the first quarter and way higher than the 6.2% growth witnessed in Q2FY23. The economy grew 7.7% in the first half of the year.
“Manufacturing sustained expansion, endorsed by IIP and core infra sector growth,” said chief economic advisor V Anantha Nageswaran.
Core sector data released separately showed strong growth rising 12.1% in October, giving further impetus to upward revisions.
“Monthly indicators show that Q3FY24 is off to a strong start with broad-based pick-up in consumption-oriented sectors, industrial activity and freight transportation services,” said Gaura Sengupta, economist, IDFC First Bank, projecting upside to FY24 number.Reserve Bank of India expects India to grow 6.5% in FY24. Earlier this week, S&P Global Ratings revised India’s economic growth forecast to 6.4%, predicting robust domestic momentum.“GDP growth for Q2 has been very buoyant coming in at 7.6%. This was far beyond expectations. This will tend to push up estimate for full year by 0.1-0.2 percentage points,” said Madan Sabnavis, chief economist, Bank of Baroda.
The numbers will also provide some comfort to the Reserve Bank of India to hold the policy rate at 6.5% for the fifth consecutive time at its meeting from December 6-8.
Manufacturing surprise, investment picks up
The manufacturing sector registered a 13.9% growth in Q2FY24, the highest in nine quarters, as company profits improved, and input costs eased further, while services growth moderated.
Besides, mining and utilities, the construction activity also registered double digit growth of 13.3%
The other significant aspect was pick up in investment, with gross fixed capital formation registering a double-digit growth of 11%, owing to capex push by state and central government.
“The investment rate, measured as the nominal GFCF-to-GDP, inched up to 30.0% in Q2 FY2024 from 29.1% in the year-ago quarter. This was the highest investment rate in any Q2 since Q2 FY2015,” said Nayar.
Experts indicate that investment is likely to moderate in the second half.
“Investment is showing strong growth trend, there could be some moderation in H2 as both government and private sector may restrain their capital spending ahead of the general elections,” said Rajani Sinha, chief economist, CareEdge.
Private consumption falters, rural recovery still away
Private final consumption expenditure was another disappointment with 3.1% growth in Q2, halving from 6% in Q1.
“PFCE growth halved to 3.1% from 6.0% in Q1, partly reflecting the weakness in rural demand,” said Nayar.
The agriculture sector also underperformed growing just 1.2% in the second quarter compared with 3.5% in Q1FY24 and 2.5% in Q2FY24, its slowest expansion in four and a half years.
“Going ahead, private consumption could accelerate owing to further improvement in urban demand led by festive boost in Q3. However, the outlook for rural demand revival remains clouded amid monsoon deficiency and likely hit to the agricultural production,” Sinha said.
Growth surprise
-GDP rises 7.6% in Q2FY24 vs 7.8% in Q1
-Experts revise FY24 forecast by 0.1-0.2 percentage points
-Manufacturing and construction rise double digit
-Investment rises in double digits as well
| (GDP, % change y-o-y) | |
| Q1FY23 | 13.1 |
| Q2FY23 | 6.2 |
| Q3FY23 | 4.5 |
| Q4FY23 | 6.1 |
| Q1FY24 | 7.8 |
| Q2FY24 | 7.6 |
| MoSPI |
| (% change in Q2FY24, y-o-y) | |
| Private Final Consumption Expenditure (PFCE) | 3.1 |
| Government Final Consumption Expenditure (GFCE) | 12.4 |
| Gross Fixed Capital Formation (GFCF) | 11.0 |
| Agriculture, Livestock, Forestry and Fishing | 1.2 |
| Mining & Quarrying | 10 |
| Manufacturing | 13.9 |
| Electricity, Gas, Water Supply & Other Utility Services | 10.1 |
| Construction | 13.3 |
| Trade, Hotels, Transport, Communication & Services related to Broadcasting | 4.3 |
| MoSPI |
