India's Gross Domestic Product (GDP) growth rate hit a four-quarter high in April-June, rising to 7.8 percent, the Ministry of Statistics and Programme Implementation said on August 31.
At 7.8 percent, the latest quarterly growth number is slightly above expectations. A poll conducted by Moneycontrol had shown economists expected GDP growth for the first quarter of 2023-24 to come in at 7.7 percent.
Meanwhile, the Reserve Bank of India (RBI) had forecast a growth rate of 8 percent.
The Indian economy had expanded by 6.1 percent in January-March and 13.1 percent in April-June 2022.
| BREAKDOWN OF APRIL-JUNE GDP DATA | |||
| Q1 FY24 | Q4 FY23 | Q1 FY23 | |
| Real GDP | 7.8% | 6.1% | 13.1% |
| Nominal GDP | 8.0% | 10.4% | 27.7% |
| Real GVA | 7.8% | 6.5% | 11.9% |
| Agriculture, forestry, fishing | 3.5% | 5.5% | 2.4% |
| Mining, quarrying | 5.8% | 4.3% | 9.5% |
| Manufacturing | 4.7% | 4.5% | 6.1% |
| Electricity, gas, other utilities | 2.9% | 6.9% | 14.9% |
| Construction | 7.9% | 10.4% | 16.0% |
| Trade, hotels, transport, etc | 9.2% | 9.1% | 25.7% |
| Financial, real estate, professsional services | 12.2% | 7.1% | 8.5% |
| Public administration, defence, other services | 7.9% | 3.1% | 21.3% |
To be sure, the rise in the growth rate in April-June was aided by a favourable base effect, although it is gradually fading away.
"The lower-than expected GVA growth was largely on account of the manufacturing sector, which saw a surprisingly meek uptick to 4.7 percent in April-June from 4.5 percent in January-March, despite the improvement in manufacturing volumes, as depicted by the IIP (Index of Industrial Production) for the same, and a deflation in commodity prices," noted Aditi Nayar, chief economist at ICRA.
ICRA expected GDP growth to rise to 8.5 percent.
"The sharp, broad-based contraction in merchandise exports is likely to have weighed on the performance of manufacturing in April-June," Nayar added.
As per the expenditure side of the GDP data, the value of India's exports in April-June was 7.7 percent lower compared to the year-ago quarter. At the same time, imports were up 10.1 percent.
The expenditure side of the GDP data also showed that private consumption grew 6.0 year-on-year percent in April-June as against a growth of 2.8 percent in January-March and 19.8 percent in April-June 2022. At the same time, gross fixed capital formation growth - seen as a proxy for investments - edged down slightly to 8.0 percent in the first quarter of 2023-24 from 8.9 percent in January-March and 20.4 percent in April-June 2022.
Meanwhile, government expenditure contracted by 0.7 percent after posting a growth of 2.3 percent in January-March and 1.8 percent in April-June 2022.
According to Gaura Sen Gupta, India economist at IDFC First Bank, the expenditure-side internals are positive, particularly the pick-up in private consumption growth and continued strong growth in the capex cycle.
"Consumption growth is likely to be led by urban demand, with strong real urban wage growth and nascent signs of recovery in rural demand. Capex cycle has been supported by government with sharp rise in capital expenditure in April-June by both Centre and state governments," Sen Gupta said.
While growth shot up in April-June, it is now expected to decline over the course of 2023-24, with the RBI forecasting that it will fall to 6.5 percent in July-September, 6.0 percent in October-December, 5.7 percent in January-March 2024, before rising to 6.6 percent in April-June 2024.
"With strong growth and elevated inflation, the RBI would be hard pressed to tighten monetary policies. If retail inflation does remain high in August, we would expect a symbolic rate hike," said Sujan Hajra, chief economist at Anand Rathi Shares and Stock Brokers.
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