Growth Domestic Product (GDP) registered growth of 7.8 percent in the April-June quarter of the current fiscal, according to data released by the ministry of statistics and programme implementation last week. This growth rate is much lower than 13.1 percent growth recorded in the first quarter of last year but higher than 6.1 percent growth recorded in January-March period of 2022-23. Experts warn that GDP growth may moderate in the quarters ahead.

Detail data shows that the agriculture sector recorded 3.5 percent growth against 2.4 percent in the April-June quarter of 2022-23 but growth in the manufacturing sector decelerated to 4.7 percent compared to 6.1 percent in the year-ago period. Services sector has been the main driver of growth, with activity in financial services showing healthy performance. On the other hand, growth in the manufacturing sector decelerated to 4.7 percent in the first quarter.

Government expenditure, which now accounts for 10.1 percent of GDP in the first quarter, declined 0.7 percent while private consumption, which accounts for nearly 60% of the economy, grew about 6 percent y-o-y and 2.8 percent in the previous quarter. Capital formation, an indicator of investment, eased to about 8 percent while private consumption expenditure, an indicator of consumption demand, grew 6 percent against 20.4 percent and 19.8 percent, respectively, in the corresponding period a year ago.

While the first quarter GDP growth is just below the RBI estimate of 8 percent, economists point out that slowing capital expenditure, falling corporate profitability, demand-curbing monetary policies and diminishing global growth prospects may hit our growth further in the coming quarters. In addition, the manufacturing sector’s growth does not seem to be broad-based and inflationary pressures still pose a challenge to the growth prospects of the economy.

I invite your opinions.