India’s real GDP growth in the second quarter of FY24 may have exceeded the 6.5% growth rate the Reserve Bank of India (RBI) had predicted. The forecasts vary from 6.2% to as high as 6.9%, while the majority have updated their projections upward.
Economists cite sequentially higher government consumption spending and relatively strong consumption demand that continued into the second quarter following an upswing in the first quarter to justify their upward revisions of Q2 GDP estimates. Stable investment rates are being accompanied by robust services sectors that are expected to drive up the growth rate.
Governor of the Reserve Bank of India Shaktikanta Das stated last week at an event that “growth momentum in India continues to be strong.” Considering the current economic momentum and some recent early statistics, I predict that the GDP number for the second quarter will surprise everyone to the upside.
While the growth in gross final capital formation (GFCF) decreased to 8% from 8.9% in April-June, the growth in private final consumption expenditure (PFCE) increased to 6% from 2.8% in January-March. The economy’s total consumption is shown by the PFCE, while investments are indicated by the GFCF.
PFCE’s portion of Q1 GDP increased to 57.3% from Q4 FY23’s 55.0%, while GFCF’s share decreased to 34.7% from 35.3%.
In the first quarter of any financial year since the current GDP series began in 2011, PFCE’s share of 57.3% in April–June was the second-highest, while GFCF’s share, which is similar to Q1 FY23, was the highest. It is probable that this pattern will persist throughout the second quarter of FY24 as well.
In July and August, the growth rate of the Index of Industrial production (IIP) was 8.2%, up from 4.7% in the first quarter. Economists predict the September IIP to be around 6%, despite the fact that the data is not yet available. In Q2, the Manufacturing PMI averaged 57.9, which was unchanged from Q1.
