India’s economy grows at fastest pace in a year in April-June quarter

India remains one of the fastest growing major economies, especially as China’s post-pandemic recovery has slowed. PHOTO: AFP

Published Thu, Aug 31, 2023 · 09:19 AM

INDIA’S economy grew at its quickest pace in a year in the April-June quarter, buoyed by strong services activity and robust demand, but a drier-than-normal monsoon season could restrain future growth.

Gross domestic product (GDP) expanded 7.8 per cent on an annual basis in the second quarter of 2023, accelerating from 6.1 per cent growth recorded in Q1 and topping a 7.7 per cent forecast in a Reuters poll.

It was also the highest reading since the equivalent period of 2022, when growth stood at 13.1 per cent.

India remains one of the fastest growing major economies, especially as China’s post-pandemic recovery has slowed.

“The GDP data for Q2 (Q1 of FY23/24) confirm a resilient first half of the year for India’s economy in the face of the Reserve Bank of India’s (RBI) policy tightening,” said Thamashi De Silva of Capital Economics.

RBI has raised its interest rate by 250 basis points since May 2022.

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“The push is provided by the services sector where both trade, transport and finance and real estate have grown by 9.2 per cent and 12.1 per cent in high base growth rates,” said Madan Sabnavis, economist at Bank of Baroda.

Construction activity growth was also strong at 7.9 per cent.

But most economists warned that dry conditions could hurt growth in the coming quarters.

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India is likely to receive an average amount of rainfall in September, after the driest August in more than a century.

“Going forward, we need to watch for risks to the agriculture sector, sustenance of capex push from central and state governments, global demand conditions, and lagged impact of interest rate hikes,” said Suvodeep Rakshit, senior economist at Kotak Institutional Equities.

In the April-June quarter, private consumption, which accounts for nearly 60 per cent of the economy, grew about 6 per cent year on year, up from 2.8 per cent in the March quarter, while manufacturing expanded 4.7 per cent, compared with 4.5 per cent in the previous three months.

However, growth in capital formation, an indicator of investment, eased to about 8 per cent year on year from 8.9 per cent in the previous three months. REUTERS

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