FISCAL STRENGTH

Higher-than-anticipated Q2 GDP growth of 7.6 per cent and contained fiscal deficit improve prospects for FY24, but pockets of concern remain

- SURABHI

THE ECONOMY SEEMS to be in better shape than anticipated. Growth prospects appear much brighter than earlier believed, and government finances are in better shape, with the fiscal deficit more manageable than expected.

Official estimates for gross domestic product (GDP) growth in the July-September quarter of financial year 2023-24 (Q2FY24), that were released on November 30, reveal that the economy grew at 7.6 per cent year-on-year against 7.8 per cent in Q1. It was significantly higher than the Reserve Bank of India's (RBI) estimate of 6.5 per cent.

This growth was aided by a nine-quarter-high expansion in the manufacturing sector, of 13.9 per cent. The construction sector, too, grew by 13.3 per cent in Q2, while mining grew 10 per cent, and electricity and utilities clocked a similar 10.1 per cent growth. However, growth in the services sector moderated to 5.8 per cent, while agriculture grew by a mere 1.2 per cent.

GDP growth of 7.7 per cent in the first half of the fiscal implies that the economy is likely to grow at a higher rate than the official estimate of 6.5 per cent for the financial year.

"The numbers impart a certain upside to the 6.5 per cent growth projection for FY24. We will have to see how to rework it," Chief Economic Advisor V. Anantha Nageswaran said soon after the data was released, while underscoring that the growth momentum is expected to continue in Q3.