India's Q1 GDP Growth Jumps To Four-Quarter High Of 7.8%; GVA Expands 7.8%
India's economy remained resilient in the first quarter of FY24, with the GDP growing in line with expectations.
India's economy remained resilient in the first quarter of FY24, with the GDP growing in line with expectations.
The gross domestic product grew 7.8% in April-June, a step up from 6.1% in January-March and the highest in four quarters, according to the latest estimates released by the government's statistical office on Thursday. Gross value added, which strips out indirect tax and subsidies, is estimated to have grown 7.8% compared with 6.5% in the previous quarter.
GDP was estimated to grow 7.8% in Q1, according to 44 economists polled by Bloomberg. GVA growth was pegged at 7.7%.
Domestic private consumption and fixed investment, along with services, drove expansion even as the economy currently battles high inflation that the central bank expects will be transitory. However, risk of a 'below-normal' monsoon continues to cloud outlook even as a tighter monetary policy and weak exports may pull down growth in the second half of the fiscal.
A supportive base along with favourable demand conditions aided growth, said Rajani Sinha, chief economist at CareEdge. From the supply side, services remained the key support pillar, while strength in construction and manufacturing also contributed, she said. On the demand side, the pick-up in private consumption was a positive development whereas investment demand remained strong supported by public capex, Sinha said.
Industry Trends
Agriculture grew 3.5% in Q1 compared with 5.5% in Q4 FY23.
Mining grew 5.8% as against 4.3% in the previous quarter.
Manufacturing expanded 4.7% as against 4.5% in the prior quarter.
Electricity and other public utilities expanded 2.9% versus 6.9% in Q4.
Construction grew 7.9% in Q1 compared with 10.4% in Q4.
Trade, hotel, transport, and communication expanded 9.2% versus 9.1%.
Financial services sector grew 12.2% against 7.1%.
The public administration segment grew 7.9% compared with 3.1% in Q4 FY23.
Within services, private services growth remains strong, led by real estate and financial sector and contact-intensive trade hotels and transportation, said Gaura Sengupta, India economist at IDFC First Bank.
Listed company performance showed strong profit growth for services sector and continued expansion in manufacturing sector, Sengupta said. A decline in input cost pressures has supported company profitability, more than countering slowdown in sales growth, Sengupta said.
Expenditure Trends
Private consumption, reflected in private final consumption expenditure, grew 6% compared to 2.8% in Q4 FY23.
Investments, as reflected by gross fixed capital formation, grew 8% as against a growth of 8.9% in the previous quarter.
Government final consumption expenditure contracted 0.7% in Q1 compared to a growth of 2.3% in Q4 FY23.
The internals were positive with pick-up in private consumption growth and continued strong growth in capex cycle, said Sengupta. Consumption growth is likely to be led by urban demand, with strong real urban wage growth and nascent signs of recovery in rural demand, she said. Capex cycle has been supported by government with a sharp rise in capital expenditure in Q1 by both central and state governments, Sengupta added.
Slower Growth Ahead
This is likely to be the peak growth performance for this fiscal, said DK Joshi, chief economist at Crisil. Growth in the July-September quarter will moderate due to softening consumption as spiking inflation will dent discretionary-spending power, he said.
For the rest of the year, headwinds from slowing global growth and the lagged impact of interest rate hikes will play out, he said. Additionally, if dry weather conditions seen in August continue in September, agricultural output could be impacted, he Joshi said.
Chief Economic Advisor Anantha Nageswaran said investment and consumer momentum will underpin solid growth prospects over the upcoming year.
The impact of deficient rains in August is to be watched, along with the impact of firming prices of Brent crude, he said in a press briefing post the data release.
A slowdown in the global economy and trade may moderate export growth, while prolonged geopolitical uncertainty and likely tighter financial conditions also pose a challenge to the growth outlook, the CEA said. The government predicts growth for the full year at about 6.5% with risks evenly balanced.
