24, February, 2024
HomeBusinessManufacturing Drives Q2 GDP Growth to 7.6% Amid Varied Sectoral Trends

Manufacturing Drives Q2 GDP Growth to 7.6% Amid Varied Sectoral Trends

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The economy surprised analysts by clocking a robust 7.6% growth in the second quarter of the fiscal year 2023-24, led notably by a substantial surge of 13.9% in the manufacturing sector. Data unveiled by the National Statistical Office (NSO) revealed a noteworthy rebound driven mainly by manufacturing, attributing to an impressive year-on-year growth in the quarter under review.

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Despite this surge, the cumulative GDP growth for the April-September period of 2023 stood at 7.7%, marking a slight dip from the corresponding 9.5% recorded in the previous fiscal year. This quarter’s GDP growth of 7.6% surpassed expectations, although it slightly contracted from the 7.8% peak in the initial quarter, with a subsequent 6.2% growth in the July-September 2022 period.

Chief Economic Adviser V Anantha Nageswaran highlighted that robust investment and consumer sentiment are anticipated to sustain the economic momentum in the ongoing and upcoming financial years. However, he cautioned against overestimating the growth potential, asserting that the current figures could indicate an understated rather than overstated GDP growth trend.

The quarter witnessed a notable slowdown in year-on-year growth in the services and agriculture sectors, registering subdued expansions of 5.8% and 1.2%, respectively. Notably, government-led capital expenditure emerged as a crucial growth driver, evident in the surge of Government Fixed Capital Formation (GFCF) by 11.04%.

Private final consumption expenditure (PFCE) indicated a moderated growth at 3.1%, compared to the earlier 6%, causing a reduction in its share of GDP. Conversely, Government Final Consumption Expenditure (GFCE) rose to 8.9% of GDP, reflecting an increase from the previous 8.6%.

The noteworthy growth in Gross Fixed Capital Formation (GFCF) and government capex showcased the government’s significant role in bolstering the economy, particularly ahead of state elections. However, the fiscal year’s remaining prospects might witness moderation, attributed to various factors such as normalizing bases, weak agricultural output, global economic slowdown, and a possible slowdown in government capex amid upcoming elections.

Read Also | India’s Q2 GDP Growth Beats Estimates – 5 Insights Revealed

Despite the impressive second-quarter growth, economists remain cautious, revising the FY2024 growth forecast to 6.2% from the earlier projection of 6.0%. The diverse sectoral performances underscore the contrasting trends in the economy, with manufacturing driving growth while other sectors show signs of deceleration.

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