In a pleasant surprise, GDP growth during the July-September 2023-24 quarter recorded a 7.6 percent growth. This growth is considerably higher than estimated previously, although the RBI governor had in October said that the second quarter growth may surprise on the upside. Compared to the first quarter growth of 7.8 percent, growth during the second quarter is only a tad lower despite erratic monsoon impacting the farm sector.

Manufacturing contributed the largest share to these growth figures with 13.9 percent rise. This was followed by the construction sector which grew by 13.3 percent and the electricity, gas, water supply and other utility services, which grew by 10.1 percent. The agriculture sector grew by a mere 1.2 percent compared to 3.5 percent in the previous quarter, but experts point out this was due to erratic monsoon and not for any fundamental flaw.

It is also encouraging to see the capital expenditure by the government contributing to the growth figures in a big way, with Government Fixed Capital Formation rising 11.04 percent as compared to 8 percent in the first quarter. Some other specific indicators, such as 16.3 percent growth in coal production, 19.5 percent rise in steel production, 11.5 percent increase in bank deposits and 13 percent in loans given by banks – all these indicate an improving economic environment.

Complacency should not be allowed to creep in, however. Continuing this high growth momentum, according to economy watchers, will definitely be a challenging task, particularly in the background of weak farm outlook, lackluster global growth and normalizing base. Also, with the Parliamentary elections ahead, the Centre may tighten the purse strings as far as government capital expenditure is concerned.

I invite your opinions.