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Below the Perspective on GDP data by Ms. Rajani Sinha, Chief Economist, CareEdge 

“India’s second quarter GDP growth at 5.4% has come as a big negative surprise. While the GDP growth was expected to moderate as being indicated by some of the high frequency macro economic indicators and weaker corporate performance, the quantum of deceleration is much sharper than expected. Lower growth is mainly because of poor industrial sector performance, specifically mining, manufacturing and electricity segment. The recovery of the agriculture sector continued with a good kharif harvest, and the services sector maintained its broad momentum.

There has also been a sharp moderation in investments. The government’s capex that had been supporting growth so far, saw a moderation, with the Centre and consolidated State capex falling by 15% and 11% respectively in H1. However, the positive aspect is that consumption growth has remained healthy at around 6% in Q2.

We expect GDP growth to pick up in the second half of the year as the government pushes up its capex spending. Agri production is estimated to be healthy and that should help further bolster rural consumption. Food inflation is also expected to moderate by the fourth quarter and that would be supportive of pick up in consumption. Beyond that urban consumption would be dependent on improvement in the employment scenario and real wage growth. Sustained momentum in consumption growth would be critical for private investment to pick up. The order book of capital goods companies and road development companies are showing a significant pick up in first half of the year and that bodes well for overall pick up in capex. However, weak growth in China and consequent flooding of markets like India would remain a deterrent for pick up in private investment. On the external front, while merchandise exports growth is likely to remain muted in midst of global uncertainties, we expect the momentum in services exports to continue. Overall, we expect GDP growth of around 6.8% in H2, taking our projection for FY25 to around 6.5%.”

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