Manufacturing sector pushes GDP growth to 7.6 pc in Q2

New Delhi, Nov 30 (Mayank Nigam) Surpassing broad market expectations, India’s gross domestic product (GDP) grew 7.6% year-on-year in the July-September quarter (Q2) of the current financial year 2023–24. “Real GDP or GDP at Constant (2011–12) Prices in Q2 2023–24 is estimated to attain a level of Rs 41.74 lakh crore, as against Rs 38.78 lakh crore in Q2 2022–23, showing a growth of 7.6 percent as compared to 6.2 percent in Q2 2022–23,” said the Ministry of Statistics and Programme Implementation (MoSPI) in its release on GDP data. The Q2 GDP growth number is higher than the Reserve Bank of India’s (RBI’s) estimate of 6.5%.

The manufacturing sector propelled the GDP growth in the September quarter as it expanded at 13.9% during this period, up from 4.7% in the previous quarter. “The 2QFY24 GDP print at 7.6% has come closer to our forecast at 7.3%, while overshooting both consensus (6.8%) and the RBI (6.5%) considerably. The buoyant growth is being underpinned by cyclical factors like robust corporate profits, a strong fiscal impulse, with government spending being front-loaded in a pre-election year, and a boisterous financial sector, led by easier lending standards and higher credit growth,” said Madhavi Arora, Lead Economist, Emkay Global Financial Services. The better-than-expected GDP growth shows the Indian economy’s resilience against global headwinds, which have impacted the exports sector. The latest GDP data showed the farm sector grew 1.2% year-on-year in Q2 of the current fiscal as compared to 3.5% in the previous quarter. The labor-intensive construction sector grew 13.3% in Q2 as compared to 7.9% in Q1. Trade, hotels, transport, and communication grew 4.3% in Q2.

As per the MoSPI data, electricity, gas, water supply, and other public utilities expanded 10.1% in Q2 of the current fiscal year. Financial, real estate, and professional services grew by 6% during the period under review. The public administration, defense, and other services segment registered 7.6% growth during Q2 FY24. “Looking ahead, we project GDP growth to moderate significantly in H2 FY2024, with the continuing headwinds such as the normalising base, weak outlook for agri output and rural demand, tepid global growth, narrowing differentials in commodity prices, and transmission of past monetary tightening,” said ICRA Chief Economist Aditi Nayar. “Additionally, the possible slowdown in the momentum of government capex as we approach the parliamentary elections could constrain growth outcomes. Given the higher than forecast outcome for Q2, we are revising our FY2024 growth forecast to 6.2% from 6.0%,” she further said.