Page 16 - CII Artha Magazine

Domestic Trends
India’s GDP
grew at a
healthy
pace in
1QFY24
T he world has gradually while bank credit grew at a
recovered from the
healthy 14.9 per cent as on
impact of Covid-19 pandemic,
but global growth remains other indicators, passenger
fragile and inflation stubbornly
persistent. The Indian traffic, air passenger traffic
economy, however, has been performed well during the
exuding strength and stability
despite the massive shocks to
the global economy in recent
years. rising FMCG sales and growth
in agri incomes.
The performance of several
high frequency indicators on
the domestic front have been
holding up well. Latest data
suggests that GST collection in
August stood at Rs 1.59 lakh
crore recording a growth of
11 per cent on an annual basis,
16 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY
QUARTERLY JOURNAL OF ECONOMICS
SEPTEMBER 2023
On the demand side, the 6.0 per also encouraging. The government, DESPITE STRONG pressure on food items is
cent growth in consumption
too, continues to frontload its
expected to be transitory, as
GROWTH,
evident in the steady
demand has been particularly
capital expenditure, though there
INFLATIONARY
has been some drop in the
noteworthy, which came against
performance of the
PRESSURES HAVE
quantum of spending during
the backdrop of 2.8 per cent
agriculture sector in Q1,
growth recorded in Q4FY23. Q1FY24 as compared to the year RE-EMERGED, along with expected fresh
LARGELY DRIVEN
ago period.
Similarly, the 8.0 per cent growth
arrivals of crops in the
BY GLOBAL
in gross fixed capital formation is
market.
HEADWINDS AS
WELL AS PATCHY
On the external front, India’s
MONSOON
Demand Side Components (y-o-y%)
export performance has
10.0 6.0 -0.7 8.0 Despite the strong growth been adversely impacted by
a slowdown in demand in its
6.0
major trading partners
including EU, US and China.
prospects, inflationary
2.0
Both merchandise exports
pressures have re-emerged,
-2.0
driven primarily by global
and imports are in the
negative trajectory with
disruptions, along with
-6.0 Note: PFCE is private final consumption expenditure; GFCE is gross fixed capital expenditure domestic factors such as exports showing a degrowth
GFCF
GFCE
PFCE
patchy monsoon and slow
of 15.9 per cent while
Q3FY23
Q4FY23
Q2FY23
Q1FY24
imports shrinking by 17.0
crop sowing. The CPI-based
inflation, after accelerating
per cent in July. Services
and GFCF is gross fixed capital formation
exports on the other hand
to 7.44 per cent in July,
Source: CSO, CII Research
slowed to 6.83 per cent in
continue to do well, growing
INDIA RECORDED A demand is also noteworthy as On the supply side, growth in the output, owing to the weak August as the pressure from 8.1 per cent in July. However,
services imports reported a
food prices, especially from
vegetables moderated a bit.
contraction of 2.2 per cent.
demand conditions, both
economy was led by the services
it augurs well for stimulating
Furthermore, the price
GROWTH OF 7.8 PER
sector, which rose by an
domestic and external. It posted a
demand in other sectors too
CENT IN THE FIRST
impressive 10.0 per cent in
growth of 4.7 per cent in Q1FY24
QUARTER OF THE
on growth.
CURRENT FISCAL through its multiplier impact Q1FY24. This is being reflected in from 4.5 per cent in Q4FY23, Outlook
the robust performance in the
however, remained much below
(Q1FY24) AS financial, real estate & the 6.1 per cent growth achieved
COMPARED TO 6.1 Encouragingly, India has been professional services which in Q1FY23. Domestic activity has from the upcoming festive
PER CENT IN THE able to withstand the external notched a 12.2 per cent growth displayed resilience on season demand cheer.
PREVIOUS QUARTER headwinds far better than to take the economic momentum Further, agriculture, forestry, and the back of healthy
(Q4FY23) many other countries. At the forward. The growth in real estate fishing have also done well, despite domestic demand. Among the major
time when other economies, and construction services could the unseasonal and deficient Investment activity is challenges, rising inflation
doing well mainly led by
is a significant one, which
be the result of the rise in
rainfall, having clocked 3.5 per
growth was buttressed by including that of US, UK and government capex and a fall in cent growth in Q1FY24 as against public capex spending, is however, expected to
China are facing a slowdown,
robust domestic demand and
which has been
taper in the months
August 25, 2023. Amongst resilient service sector growth India clocked its highest GDP input prices while strong credit the 2.4 per cent recorded for the front-loaded in the ahead when fresh kharif
demand and pick up in business
corresponding period last fiscal.
even as net exports remained growth in four quarters, which services would have lifted However, the outlook for current fiscal. Healthy harvest hits the market.
vehicle sales, rail freight, port a drag on growth. The further reaffirmed its high financial services and business agriculture production remains seasonally adjusted On the external front,
continuing robust growth trajectory. services growth respectively. uncertain considering the capacity utilisation levels while tepid global
performance by investment deficient and skewed rainfall maintained by the scenario has slowed
period. Additionally, the rural The manufacturing sector has distribution. manufacturing sector down India’s merchandise
firms in the first quarter
economy is also gaining shown a marginal improvement in of FY24 bodes well for exports, service exports
have remained firm.
momentum as evident by Quarterly GDP of major economies (y-o-y%) sustaining the signs of
Supply Side Components (y-o-y%) recovery seen in private Going forward, with risks
US Eurozone UK Japan China India 20.0 capex. Discretionary evenly balanced, we
15.0 demand, on the other believe India is firmly on
All these trends were Q4 FY23 1.8 1.1 0.2 2.0 4.5 6.1 10.0 10.0 hand, is a bit weak track to post a growth
mirrored by the impressive [Jan-Mar 2024] 5.0 3.5 4.6 currently as high inflation rate of 6.5 per cent in the
GDP growth of 7.8 per cent in 0.0 has taken a bite off current fiscal and remain
the first quarter of the current Q1 FY24 2.6 0.6 0.4 1.6 6.3 7.8 demand of FMCG and the fastest growing major
fiscal (Q1FY24) as compared [Apr-Jun 2024] -5.0 Agriculture Industry Services other consumer linked economy for the third
sectors. It is however
to 6.1 per cent in the previous Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24 year in a row.
Source: National Sources expected to get a leg-up
quarter (Q4FY23). The higher Source: CSO, CII Research
ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 17
QUARTERLY JOURNAL OF ECONOMICS
SEPTEMBER 2023