New Delhi : Even though India’s economy is predicted to continue expanding at the fastest rate in the world, some analysts predict that the GDP growth rate will decrease in the second half of the current fiscal year.
The Indian economy, which is regarded as a worldwide bright spot, performed admirably in the first half of FY24, with a high GDP growth print of 7.8% year over year in Q1FY24. Based on the data from high frequency indicators, the second quarter is expected to see another strong 6.8% gain.
Both the investment and the consumption drivers were active in HI FY24; although public infrastructure spending has been the main driver of economic growth, India has also witnessed strong demand for its products and services.
Suman Chowdhury, Chief Economist and Head of Research at Acuité Ratings & Research, stated that “we don’t expect any significant moderation in the intensity of public capital expenditure, but persistent headwinds on the export front, higher interest rates along with a tighter funding environment for consumer loans and weaker agricultural output due to the El Nino phenomenon can pose risks to the overall growth trajectory in the second part of FY24.”
He told IANS, “We hold on to our base forecast of 6.0 per cent for FY24 and expect 5.0-5.5 per cent growth in H2FY24.”
Ajay Seth, the secretary of economic affairs, is upbeat about the prospects for growth.
“We anticipate a high number. Early signs point to strong second-quarter momentum,” he stated on Wednesday.
Shaktikanta Das, the governor of the RBI, has also stated recently that a nice surprise could come from the growth rate from July to September. On Thursday, the GDP data for the quarter are probably going to be revealed.
Undoubtedly, one of the main causes of the current economic pace in India is the resiliency of urban demand. According to reports, there has been a surge in urban demand, as seen by increases in the sales of passenger cars, online food delivery, airline traffic, and hotel occupancy. This has especially translated into a greater than expected momentum in the services sector. Even though India was not the winner of the ICC Cricket World Cup, the event undoubtedly contributed to the increase in demand for consumption in October through November of 23 in addition to the usual celebrations.
Nevertheless, the rural engine is running on a slightly different track. There are indications of a weaker rural demand due to the El Nino phenomenon, the estimated shortfall in the kharif crop and the risks to the current rabi crop.
Having been on a path of mend over the last three quarters, rural consumption recovery was however punctured in Q2 FY24 owing to a confluence of adverse macroeconomic and seasonal factors including high inflation in Q2 and the irregular monsoon. Some of the high-frequency data points have validated the Q2 FY24 slowdown in rural demand
On a FYTD basis (Apr-Oct), domestic tractor sales have contracted by 4 per cent on an annualised basis.
Most FMCG companies recorded a slower volume growth in rural markets in Q2 FY24 versus Q1 FY24.
IIP data available till September indicates that consumer goods output has grown by only 3.7 per cent YoY in the first half of the year with the consumer durables production actually declining by 0.7 per cent YoY. This also reflects the fragility in rural demand.
