The Indian economy has exceeded expectations and is projected to have expanded by 7% during the second quarter of the current fiscal year, according to the research firm ICRA. This growth surpasses the projection made by the Reserve Bank of India’s rate-setting panel.
ICRA’s report states that India’s economic growth is expected to have eased to 7% in the second quarter, following a stronger growth of 7.8% in the first quarter. The adjustment is attributed to a normalization of the base and unpredictable monsoon patterns.
Aditi Nayar, Chief Economist and Head of Research & Outreach at ICRA, highlights several factors that may impact future growth. These factors include uneven rainfall, narrowing differentials in commodity prices compared to the previous year, a possible slowdown in government capex momentum leading up to the Parliamentary Elections, weak external demand, and the cumulative impact of monetary tightening.
Despite these challenges, investment activity in the country has shown strength. According to the report, seven out of eleven investment-related indicators have exhibited improved year-on-year growth compared to the first quarter. Additionally, four indicators that experienced a weakened growth rate in Q2 still witnessed double-digit expansion, including CV registrations, cement production, states’ capital outlay and net lending, and the Government of India’s capex.
Construction activity has also sustained robust momentum in the second quarter, with disruption caused by below-average rainfall being relatively minimal compared to historical patterns.
Overall, while the Indian economy has demonstrated resilience and exceeded expectations in the second quarter, challenges lie ahead. The impact of various factors, including upcoming elections and global economic conditions, will determine the trajectory of the economy in the coming months.
1. What is ICRA?
ICRA is a research firm that provides credit ratings, research, and risk and policy advisory services in India.
2. Why did India’s economic growth slow down in the second quarter?
India’s economic growth slowed down in the second quarter due to a normalization of the base and unpredictable monsoon patterns.
3. What are the challenges that may affect India’s GDP growth in the future?
Some of the challenges that may affect India’s GDP growth include uneven rainfall, narrowing commodity price differentials compared to the previous year, a possible slowdown in government capex momentum, weak external demand, and the cumulative impact of monetary tightening.
4. How has investment activity performed in India?
Investment activity in India has shown strength, with seven out of eleven investment-related indicators exhibiting improved year-on-year growth compared to the first quarter.
5. How has construction activity fared in the second quarter?
Despite below-average rainfall causing relatively fewer disruptions, construction activity in India has sustained robust momentum in the second quarter.