India`s economic performance in Q1 FY24 by Dr. Manoranjan Sharma, Infomerics Ratings.
The Indian economy grew at 7.8% in the first quarter of the financial year. Consistent demand, higher activities in the services sector and increased capital expenditure were the drivers behind the GDP growth.
Sectoral Growth: Agriculture recorded a growth of 3.5%. However, construction activity decelerated to 7.9% from the previous year, while the services sector posted a 10.3% growth, driven by the 'Financial, Real Estate & Professional Service' sector
Private Consumption and Investment Spending: Capital formation and private consumption expenditure which are vital for growth sustainability, rose by 8% and 6% respectively
Government Initiatives and Manufacturing Output: Public digital platforms and strategic government initiatives including PM GatiShaktit, the National Logistics Policy and Production-Linked Incentive schemes, are expected to boost manufacturing output. India's rural demand for FMCGs, especially high-value goods is on the rise
Banking Landscape and Financial Stability: The banking sector exhibited resilience, with lower NPAs and improved return on assets (RoA). Public sector banks (PSBs) reported robust performance, with profit figures of ?34,774 crore. The 4Rs strategy measures like recognition, resolution, recapitalization, and reforms have played a pivotal role in this turnaround
Banking Liquidity and Expanding Bank Credit: The banking sector has effectively managed surplus liquidity through temporary measures such as the imposition of an incremental cash reserve ratio (I-CRR). The merger of HDFC with HDFC Bank has spurred credit growth, reaching 19% in July 2023
Core Industries Growth: Core industries, comprising coal, natural gas, crude oil, and more, reported an 8% growth in July 2023. These industries significantly influence the Index of Industrial Production (IIP) as they comprise 40.27% weightage
India stands out as a beacon of hope amid the global economic slowdown. With robust industrial growth, buoyant services activity, and positive demand conditions, India's real GDP growth for 2023-24 is projected at a steady 6.5%. Overall, the latest economic data is positive and suggests that the Indian economy is on track.
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