In a surprising twist on Thursday, the Ministry of Statistics and Programme Implementation (MoSPI) unveiled the economic growth figures for the second quarter of the current financial year (2023-24 or FY24), encompassing the months of July, August, and September. India's Gross Domestic Product (GDP), the gauge of economic output, recorded a robust growth of 7.6% in Q2.
The most recent provisional GDP estimates for the quarter concluding on September 30, disclosed by the National Statistical Office, unveil a real economic growth of 7.6%. This indicates a slight deceleration from the preceding three months, where growth stood at 7.8%. Examining the Gross Value Added (GVA) across the eight expansive sectors of the economy, there's a subtle easing, with second-quarter GVA expanding by 7.4%. This is 40 basis points slower than the April-June period's robust 7.8%.
Despite a loss of momentum in four sectors, the overall year-on-year growth in GVA comfortably surpassed the 7% mark for the second consecutive quarter. Noteworthy double-digit expansions in manufacturing, mining, utilities, and construction offset the deceleration in the other four sectors. Manufacturing, leveraging a favorable base effect from the contraction in the preceding year, emerged as the star performer, boasting a growth of 13.9%, marking a nine-quarter high. Construction also showcased its best performance in five quarters, expanding by 13.3%.
However, among the remaining four sectors, the pivotal ones—agriculture and the two services sectors encompassing trade, hotels, transport, communication, and financial, real estate, and professional services—witnessed a significant slowdown compared to the fiscal first quarter. The year-on-year growth in the agriculture, livestock, and fishing sector sharply decelerated to an 18-quarter low of 1.2%. Additionally, this sector experienced a sequential contraction for the third consecutive quarter, underscoring the challenges faced by a substantial segment of those dependent on farming and related activities in the rural hinterland.
The deceleration in two vital facets of the services economy—trade, hotels, transport, and communication, witnessing a slide in growth from 9.2% in the June quarter to 4.3%, and the more than halved expansion in financial and realty services to 6%—beckons closer scrutiny. This points to a potential loss of momentum in the services sector's post-pandemic resurgence. Amplifying the need for a cautious perspective on the headline growth figure is the struggle faced by the linchpin private final consumption expenditure—the largest component of demand in the economy.
Private consumption spending, a pivotal economic driver, witnessed a notable slowdown to 3.1% in the September quarter, down from 6% in the preceding three-month period. This deceleration is attributed to the lingering impact of a subpar monsoon on rural demand. Delving into the National Statistical Office (NSO) data reveals that the recent economic impetus owes much to robust government spending, both in terms of consumption demand and capital investments fostering assets.
The challenge confronting policymakers lies in expanding the growth foundation to ensure a more equitable upliftment of all sectors. This is essential not only to sustain the prevailing momentum but also to mitigate disparities and foster a more inclusive economic landscape.
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