In contrast to the RBI’s prognosis of 6.5 percent and the majority of analysts’ forecasts of 6.8–7 percent, India’s economy grew by 7.6 percent in the second quarter of FY24.
With a robust performance in manufacturing and construction, India was able to maintain its position as the world’s fastest growing major economy thanks to its good GDP print. Construction saw a 13.3% increase in gross value added at constant prices, while manufacturing saw a 13.9 percent increase, the largest in nine quarters.
Public sector capital expenditure provided the majority of the construction boom, even though private sector infrastructure spending is improving. As a result, the economy is booming thanks to government expenditure. During the quarter, industries including mining, power, and utility services saw double-digit growth. A minor slowdown was observed in services such as real estate, finance, hotel, and trade on an annual basis.
The majority of agencies, banks, and international organisations may increase their GDP projections for India for FY24 as a result of the robust GDP growth figures. There are two noteworthy statistical points, though. Constant price growth in the agriculture sector was 1.2%, compared to 3.5% in Q1 and 2.5% in Q2 of FY23. In the meantime, private final consumption expenditure (PFCE), which serves as a stand-in for household consumption, dropped precipitously from 6.1% in Q1 to 3.1% in Q2.
These two resulted from an irregular monsoon that impacted the rural economy. And there’s the catch. Business executives have been discussing the lack of demand in rural areas and among certain urban paid groups. Premium and sport utility vehicles are the top selling automobile categories.
On the other hand, it is reported that sales of entry-level cars decreased by more than 40% from April to September of last year. Sales of two-wheelers are still weak, particularly for entry-level motorbikes, which are a reliable sign of a slowdown in rural areas. Fast-moving consumer goods (FMCG) companies have always relied on sales in cities. Hindustan Unilever blamed its poor Q2 financial performance on a lacklustre rural market.
Even in real estate, expensive properties are selling quickly while less expensive ones are not. This year, the holidays started in the middle of October. If the current quarter’s demand has increased, the economy will gain. It is anticipated that rural demand will recover and consumption will increase as welfare expenditures from the federal government and the states rise during this crucial election cycle. After all, the amount of the economic boom that can be borne by the wealthiest 10% of the population or fostered by public sector spending has its limits.
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