Saturday, 27 Jul, 2024
By: Damini Mehta
The economic upturn in the Indian economy is in line with the global trends wherein many economies are finally coming out of the pandemic induced slowdown, reaching growth level prior to COVID-19.
Nominal GDP recorded a higher growth at 9.1 per cent but it was a significant decline from 17.2 percent growth recorded during the same period in 2022-23
In what is a clear positive signal for the country, the Indian economy has recorded a 7 percent plus growth for two straight quarters in 2023. The Gross Domestic Product (GDP) numbers released recently by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation show that the real GDP or GDP at Constant (2011-12) prices for the July-September quarter (Q2) of 2023-24 is estimated to close at ₹41.74 lakh crore, as against ₹38.78 lakh crore in Q2 of 2022-23. This shows a growth of 7.6 percent, a jump from 6.2 percent in the second quarter of last year. Nominal GDP recorded a higher growth at 9.1 per cent but it was a significant decline from 17.2 percent growth recorded during the same period in 2022-23. Nominal GDP or GDP at Current Prices in Q2 2023-24 is estimated at ₹71.66 lakh crore, as against ₹65.67 lakh crore in Q2 2022-23. The economic upturn in the Indian economy is in line with the global trends wherein many economies are finally coming out of the pandemic induced slowdown, reaching growth level prior to COVID-19.
Interestingly, the uptick in economic activity in the last quarter is driven by the manufacturing sector which grew at a robust 13.9 per cent compared to 4.7 per cent in the first quarter. Manufacturing sector growth in the second quarter of this year broke all records of the past nine quarters, an indicative result of the government’s push for reforms in the sector. Policies ranging from increased government capital expenditure, the Production Linked Incentive scheme, reforms to formalize MSMEs and labor force and better access to credit are said to have contributed to this revival of manufacturing as a driver of GDP.
Agriculture sector, constrained by a weak monsoon and subsequent impact on Kharif crop, grew by a meager 1.2 per cent in the second quarter and is likely to witness subdued growth in the coming months as well. Delay in harvest of kharif crops will have an impact on Rabi sowing as well. Increase in share of allied activities such as dairy, fisheries, etc, known to hedge the cyclical impact of crop sharing, from 34.6 per cent in 2011-12 to 46.1 per cent in 2021-22 and uptick in bank loans to the agri sector as a whole have not yielded the kind of results needed in farming and agriculture. Agri loans by banks increased by 17 per cent in 2023-24 a significant jump from around 10 per cent in the past two years.
Services sector, which contributes more than 50 per cent to India’s GDP, saw single digit growth in some of the dominant sub sectors. These include trade, hotels and transport which saw the weakest growth of 4.3% during Q2, a 10 percentage point plus decline from the same quarter last year. The decline in the services sector of the Indian economy during the second quarter is known to be a cyclical character of the domestic economy but this time price rise and interest rates hikes may also have taken a toll on spending by households on services.
Compellingly, government expenditure was a major contributor to economic revival this quarter and clocked a growth of 12.35 per cent. As the ongoing quarter from October to December marks the festival and wedding season in India, economic revival will take a further uptick if other factors remain on the positive side. Global developments will also impact the economy at home given geopolitical crises and a muted consumer sentiment in both the US and Europe.
Summing up the growth in this financial year, GDP at Constant (2011-12) Prices in the first half of 2023-24 from April-September (H1 2023-24) sits at ₹82.11 lakh crore, a growth of 7.7 per cent as against ₹76.22 lakh crore during the first half of previous year. However, the same period last year recorded a 9.5 percent growth in real GDP. If government reforms and spending remain on the higher end and consumer spending keeps the sentiment up, the ongoing financial year might breach growth trends forecasted at the beginning of the year.
