Bright lights of a global bright spot
economy grew by 7.6% year-on-year in real terms in the July-September quarter of FY2024, surpassing projections by all domestic and international agencies. This follows the 7.8% expansion registered in the first quarter. The fact that this has been achieved amid a weak and uncertain global backdrop shows the resilience of the economy.
Importantly, this growth performance was driven by construction and industry.
The farm sector grew by a tepid 1.2% year-on-year, but manufacturing saw growth surging to a 9-quarter high of 13.9%, while utilities expanded by 10.1%. The construction sector also saw a strong expansion of 13.3%. Services grew at 6%, with the public administration segment growing at 7.6%, and the financial and real estate segment growing at 6%.
The growth in communications, and travel and hotels sub-sector, however, was relatively weak at 4.3%. This is somewhat surprising given anecdotal evidence that tourism is booming.
On the demand side, gross fixed capital formation (GFCF) continued to grow at a robust rate of 11% in the second quarter. As a result, India's investment rate rose to 35.3% of GDP (at constant prices), suggesting that investment activity is robust.
In contrast, private consumption grew at 3.1%. While one should not read too much into quarterly data, this may suggest the emergence of a high investment-high savings dynamic.
The available data on high-frequency indicators for the third quarter suggest that the growth momentum is being maintained. The Purchasing Managers' Index (PMI) for both manufacturing and services continued to remain strongly in an expansionary zone in October.
