A Mint poll of 22 economists had estimated the growth in gross domestic product (GDP) at around 7.8%. In the fourth quarter of 2022-23, GDP growth stood at 6.1% against a 4.4% growth rate witnessed in the preceding three months, according to data from the National Statistics Office (NSO).

Real GDP at constant (2011-12) prices for the June quarter is estimated to reach ₹40.37 trillion, marking a 7.8% expansion from ₹37.44 trillion a year ago, according to the ministry of statistics and programme implementation (MoSPI). Nominal GDP or GDP at current prices is estimated at ₹70.67 trillion, reflecting an 8% increase from ₹65.42 trillion in the year-ago quarter, the ministry said.

While robust domestic demand and manufacturing and services activity likely aided growth in the June quarter, a low-base effect could have helped as well. The statistical effect of a dip in trade deficit and the deflation method used to compute GDP may have bumped up the figures as well.

“Overall, this (GDP) is a good number. The fact that nominal GDP growth was 8% and real GDP growth was 7.8% signals that the momentum in economic activity in general is not driven by price-related distortions,” chief economic adviser V. Anantha Nageswaran told reporters. He said both the government and the Reserve Bank of India (RBI) are holding on to their 2023-24 growth forecast of 6.5%.

He said the July data is showing strong momentum except for merchandise export/non-oil exports. “Private sector capital formation is no longer a topic that is waiting to take off, but has taken off,” he said, adding that private sector capital formation, supported by the government’s capex push, is underway.

Fresh arrivals of farm produce may cool food inflation, Nageswaran said, pointing to supply-side measures taken by the government while noting the deficient rains in August.

Finance minister Nirmala Sitharaman said last week that the government expected good GDP growth in Q1. “Enhanced provision for capex by the government is crowding in private investment,” she said.

However, for some, the 7.8% figure came in below expectations. “Although a supportive base propelled India’s GDP growth to a four-quarter high of 7.8% in Q1 FY24, it nonetheless printed below our expectations of 8.5% as well as the MPC’s (monetary policy committee) projection of 8%,” said Aditi Nayar, chief economist, Icra Ltd.

“The lower-than-expected GVA growth was largely on account of the manufacturing sector, which saw a surprisingly meek uptick to 4.7% in Q1 FY24 from 4.5% in Q4 FY23, despite the improvement in manufacturing volumes, as depicted by the index of industrial production for the same, and deflation in commodity prices. The sharp, broad-based contraction in merchandise exports is likely to have weighed on the performance of manufacturing in Q1 FY24,” Nayar added.

RBI estimated Q1FY24 real GDP growth at 7.8% and full-year FY24 growth at 6.5%.

Meanwhile, the Centre’s fiscal deficit for the four months to 31 July stood at ₹6.6 trillion, accounting for 33.9% of annual estimates. The fiscal deficit in the same period of the previous year stood at ₹3.41 trillion.

This was largely due to a sharp jump in capex and accelerated tax devolution to the state governments.

Nageswaran said the government’s schemes, like the production-linked incentives and PM Gati Shakti Mission, will push domestic manufacturing, adding that a slowdown in the global economy could, however, moderate exports. However, he said there is no threat to India’s macroeconomic stability from external factors.

“I don’t see any threat to the FY24 fiscal deficit target of 5.9% of GDP at this point,” he said.

Interestingly, the growth of eight key infrastructure sectors rose to 8% in July 2023 compared to 4.8% during the same period of the previous year on the back of an expansion in coal, crude oil, and natural gas production. Steel, cement, and electricity production also grew in July, commerce and industry ministry data showed.

However, core sector growth was lower in July compared to the previous month, when it rose 8.3%. Output growth of the eight sectors was slower at 6.4% in the April-July 2023 period against 11.5% in the year-ago period.

“Core sector data shows buoyancy in July with growth of 8% over 4.8% last year. The growth has been buoyant in five of the eight sectors, while steady positive for the other three,” said Madan Sabnavis, chief economist, Bank of Baroda. “Based on these numbers, the IIP growth rate would be in the range of 5-6% for July,” Sabnavis added.

“Contraction in exports after eight quarters of double-digit growth is a concern,” said Rumki Majumdar, an economist at Deloitte India. “A global slowdown will likely keep exports down, and the government will be prudent in its spending to ensure it adheres to fiscal consolidation,” she added.

Updated: 31 Aug 2023, 11:48 PM IST