In Q2 FY24, India’s GDP growth posted a robust expansion of 7.6% YoY. The growth was primarily driven by a strong manufacturing sector, as a fall in raw material costs led to an improvement in operating margins. However, the agriculture sector witnessed sluggish growth on account of poor kharif production.

There was a steep fall in contribution from financial services+ and trade+ to Gross Value added (GVA) growth in Q2. Financial services and trade together contributed 32% to the GVA growth in Q2, lower than the 59% contribution in the previous quarter. Construction sector growth, however, was robust as indicated by healthy steel consumption and cement production.

Private consumption underwhelmed in Q2 after staging a recovery in Q1. However, government consumption recovered, driven by an improvement in central government revenue expenditure. Investment growth remained robust, on account of the strong government capital expenditure and recovery in private capex. Contribution from external trade was less negative in Q2.

FY24 GDP growth is expected to be around 6.7% YoY. Downside risks include weak rural recovery, geopolitical conflicts, and global financial volatility. Upside risks involve better-than-expected global growth and the end of central banks’ rate hike cycles.

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