India’s Q1 FY24 GDP: A Stellar Rebound to 8% Growth Unveiled

In a compelling demonstration of its economic prowess, India is gearing up to unveil a remarkable growth story for the first quarter of the fiscal year 2023-2024. As the country emerges from the shadows of the pandemic, the upcoming Q1 GDP figures which are set to release on 31 August, are poised to reveal a surge that transcends 8% growth.

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Services Sector and Government Expenditure Drive Growth

Economic activity in Q1 FY24 has gained substantial traction, mainly due to the sustained revival in demand for services and an uptick in investment activity. The services sector, encompassing segments such as financial services, trade, hotels, and transport, continues to be the cornerstone of growth. This sector is propelled by robust activity levels and is significantly bolstered by double-digit credit growth and increased deposit levels. Moreover, an encouraging acceleration in government capital expenditure has added momentum to the economic upswing.

Manufacturing and Construction Surges Ahead

The manufacturing sector is a key driver of Q1 growth, riding the wave of strong corporate profitability and a decline in wholesale inflation. With industry ex-construction poised to grow by around 12.7% year-on-year, this sector is displaying remarkable resilience. Meanwhile, the construction sector’s performance stands out as particularly impressive, set to achieve its second consecutive double-digit growth print. This success is attributed to both central and state governments front-loading capital expenditure and a resurgence in non-financial corporate investments.

Sectoral Insights: Agriculture, Mining, and More

While agriculture production is expected to maintain resilience, the mining sector is predicted to achieve flattish growth of around 4.5%. Encouragingly,the agriculture & allied sector is poised to expand by 3.6% year-on-year, with the mining sector expected to witness a 6.5% growth spurt. These dynamics reflect a balance between sectoral growth and profitability.

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Inflation, Interest Rates, and Unemployment

Monitoring inflation is essential in gauging the economy’s health. Recent data points to a surge in consumer price index (CPI) inflation to 7.44%, driven by rising food and vegetable prices. However, inflation’s trajectory is projected to remain relatively benign this year, subject to changes in food prices. The central bank’s interest rate policy remained unchanged at 6.50%, with a watchful eye on both domestic economic activity and external demand. Unemployment rates, while showing a decline in July due to agricultural labor demand, are anticipated to fluctuate as seasonal trends impact the rural and urban job markets.

GDP Growth Projections and Outlook

Economists across the board project India’s GDP growth to exceed 7.8% in Q1 FY24, with estimates ranging from 7.8% to 8.5%. This solid performance aligns closely with the Reserve Bank of India’s projection of 8% growth for Q1. Encouragingly, leading rating agencies and institutions have revised India’s GDP growth outlook upwards, indicating a positive sentiment toward the economy’s resilience and recovery.

Takeaway: India’s Q1 GDP growth forecast, poised to be close to 8%, is underpinned by a synergy of factors. The services sector’s vigour, amplified by government expenditure and an upswing in manufacturing and construction, bodes well for the nation’s economic trajectory. As inflation, interest rates, and employment trends unfold, continued vigilance will be crucial. The data-driven insights and projections pave the way for optimism, reflecting a nation on a trajectory of robust economic recovery.

Also Read: Deciphering the Metrics: S&P Global India Manufacturing PMI Insights - November 2023