India beats China as economy grows 7.6% in July-Sep quarter

01 Dec 2023 10:06:34
New Delhi, Dec 1: In a significant development, India retained the tag of the world’s fastest-growing major economy, with its GDP expanding by a faster-than-expected rate of 7.6 per cent in the July-September quarter on booster shots from government spending and manufacturing.
 
GDP india 7.6 percent
 
 

What happened?

 
 
Gross domestic product, or GDP, growth of 7.6 per cent beat most estimates, including 6.5 per cent projected by the Reserve Bank of India (RBI). The growth compares to 6.2 per cent in the same quarter last year and 7.8 per cent expansion in the preceding quarter, official data released on Thursday showed.
 

Beats China in the race

 
 
India’s GDP growth beat China’s 4.9 per cent rise in July-September, while the Western economies are getting crushed under high-interest rates and energy prices.
 
 

What does this rise means?

 
 
The surprise GDP growth, which indicates that the economic recovery is on track despite the adverse geopolitical situation, was primarily driven by an acceleration in the manufacturing sector, which surged to a nine-quarter high of 13.9 per cent from 4.7 per cent in April-June. Private consumption and agriculture demand, however, remained muted.
 
Prime Minister Narendra Modi termed the better-than-expected growth as a display of resilience and strength of the Indian economy. “The GDP growth numbers for Q2 display the resilience and strength of the Indian economy in the midst of such testing times globally. We are committed to ensuring fast-paced growth to create more opportunities, rapid eradication of poverty and improving ‘ease of living’ for our people,” he said in a post on X, formerly Twitter.
 
 
 

The growth is due to...

 
 
The buoyancy in manufacturing was helped by a favourable base, an uptick in volume growth and an improvement in profit margins, owing to continued deflation in input prices. The robust performance of the steel and cement sectors reflecting strong demand from the infrastructure sector, lower input costs improving the profitability margins, and steady domestic consumption demand in sectors like auto also contributed.
 
“Real GDP growth clocked 7.6 per cent in Q2 FY 2023. The real GDP growth has surprised on the upside by not only being higher than the median projections of 6.8 per cent by professional forecasters but also their highest estimate of 7.4 per cent,” the finance ministry said in a post on X.
 
 
Chief Economic Advisor V Anantha Nageswaran said the economic growth momentum will continue in the December quarter and the Indian economy will comfortably grow at 6.5 per cent in the current fiscal. The government spending rose 12.4 per cent compared to a 0.7 per cent contraction in the previous quarter.
 
Private consumption, however, slowed to 3.1 per cent from 6 per cent, largely due to a weakness in rural demand. A low 1.2 per cent growth in the agricultural sector reinforced the weakness in rural demand.
 
“The 2Q FY24 real GDP growth at 7.6 per cent confirms that the Indian economy is well on course to meet, if not exceed, the annual growth target for FY24 (April 2023 to March 2024 fiscal year) at 6.5 per cent as projected by the RBI earlier in October 2023,” said EY India Chief Policy Advisor DK Srivastava.
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