India registers better-than-expected GDP growth of 7.6% in Q2; here is what economists say

India registered growth of 7.6 per cent in its gross domestic product (GDP) in the July-September period, exceeding economists' expectations by a wide margin, driven by government spending and manufacturing. The expansion cemented the country's position as the fastest-growing major economy and suggested that it was on the path to surpass its official projection of 6.5 per cent for the fiscal year. According to Zee Business research, the economy was expected to log GDP growth of 6.8 per cent for the fiscal second quarter.

Here's what economists said about the latest GDP data: 

Aditi Nayar, chief economist, Icra:

"Looking ahead, we project GDP growth to moderate significantly in H2 FY2024, with the continuing headwinds such as the normalising base, weak outlook for agri output and rural demand, tepid global growth, narrowing differentials in commodity prices and transmission of past monetary tightening."

Radhika Rao, economist, DBS:

"There was a broad-based improvement in investments, reflecting higher state and centre spending alongside recovery in the real estate sector and inventory demand ahead of festivities."

"This made up for the softness in consumption spending and a negative contribution by net exports."

Prasenjit Basu, Chief Economist, ICICI Securities:

"With services accelerating slightly from their 8 per cent YoY growth in H1FY24, we expect real GDP to grow slightly more than 8 per cent YoY in H2FY24, taking FY24E real GDP growth to 7.9 per cent. Post-general election reforms (particularly the gazetting of the new labour laws) will be transformative for employment and productivity, enabling a further acceleration to 8.4 per cent real GDP growth in FY25E."

"We continue to expect the stronger economy (and the normal seasonal spurt of tax revenue in the final quarter) to enable the fiscal deficit to moderate to 5.5 per cent of GDP in FY24E, which will contribute to the further crowding-in of private investment. Public investment (especially in infrastructure) has been a key feature of the past three years, and is beginning to pay off in terms of better productivity and overall growth." 

Samiran Chakraborty, chief India economist, Citigroup:

"This reaffirms our view of sustained investment recovery... While the 13.3 per cent growth in construction gross value added indicates public infrastructure/residential capex-led investment growth – such strong gross fixed capital formation data might also suggest an element of private capex recovery."

Madhavi Arora, lead economist, Emkay Global Financial Services:

"The 2QFY24 GDP print has come closer to our forecast at 7.3 per cent, while overshot both consensus (6.8 per cent) and the RBI (6.5 per cent) considerably. The stellar 2Q growth is underpinned by cyclical factors like robust corporate profits, a strong fiscal impulse, with front-loaded government spending in a pre-election year, while factors like deflator issues in growth accounting may have also augured well for the print."

"Manufacturing alone explains more than 33 per cent of the GVA growth, while services ex-government have slowed."

Rumki Majumdar, economist, Deloitte India:

"Investment data also points to the fact that private capex spending is gaining steam -- government capex is now crowding in private spending in households and corporates."

Gaura Sen Gupta, economist, IDFC First Bank Economics Research:

"Rural demand remains weak, reflecting low real wage growth and uneven monsoon."

With inputs from agencies