After studying law I vectored towards journalism by accident and it's the only job I've done since. It's a job that has taken me on a private jet to Jaisalmer - where I wrote India's first feature on fractional ownership of business jets - to the badlands of west UP where India's sugar economy is inextricably now tied to politics. I'm a big fan of new business models and crafty entrepreneurs. Fortunately for me, there are plenty of those in Asia at the moment.
India’s economic expansion continues apace in the second quarter of FY24 with GDP growing at 7.6 percent, according to data released by the National Statistical Office. This outpaced the Reserve Bank of India (RBI) and consensus analyst expectations taken a few days before the numbers were released.
The rise in GDP was led by manufacturing and construction, which grew at 13.9 percent and 13.3 percent respectively. The growth in manufacturing has come despite slower growth globally that has caused the growth in Indian exports to stagnate. Several areas such as mobile phones and electronic manufacturing have benefited from the introduction of production linked incentive schemes. The RBI in its October meeting had pegged growth at 6.5 percent and said that high frequency indicators were pointing to a strong pace of expansion.
With growth showing no signs of slowing down, the central bank can shift its focus back to inflation. “The good part is that core inflation is relatively low even though growth is on the higher side,” says Suvodeep Rakshit, senior economist at Kotak Mahindra Bank. He believes that going forward the RBI will be more focussed on inflation and getting it back to the 4 percent target. If and when that is achieved, it can move to adjusting rates along with the global cycle. Also read: How climate change can impact GDP and jobs
One worrying trend was the weakness in consumption. The growth in private consumption expenditure stood at 3.1 percent and points to a weakness in spending. Listed consumer companies have reported dismal volume growth for the last many quarters and this trend is likely to persist. On the other hand, growth in luxury items is strong.
In October, the RBI realised that the consumer is increasingly taking on more debt to fund consumption and has increased the risk weighs on lending for personal consumption. This could put a further lid on growth in consumption. Expect more regulatory action on this front.