India's economy in the second quarter outperformed expectations, according to the latest data released by the Indian Statistical Office on Thursday. The country's Gross Domestic Product (GDP) for the second quarter (July-September) of the fiscal year 2023-2024 grew by 7.6%, slightly lower than the 7.8% growth recorded in the first quarter (April-June).
Despite a slight slowdown from the first quarter, India's second-quarter GDP growth exceeded both the Reserve Bank of India's Monetary Policy Committee's forecast of 6.5% and the media's opinion poll prediction of 6.8%.
The better-than-expected GDP growth was driven by the manufacturing sector, which saw a significant increase of 13.9% in the second quarter, compared to a 4.7% growth in the previous quarter.
This rapid growth in manufacturing is attributed to the Indian government's increased capital investment spending. For the third consecutive year, the government has raised its capital investment spending in the current fiscal year's budget, with a substantial increase of 33%, reaching 10 trillion rupees (approximately 120 billion U.S. dollars).
A research report released by the state-operated State Bank of India on November 22 stated that the second quarter's domestic economic activity was robustly supported by strong performance in agriculture, continued prosperity in the service sector, increased capital expenditure by central and local governments, and a rebound in consumer spending. However, the report also warned that the outlook is severely impacted by a global economic slowdown, export headwinds, geopolitical risks, and unstable global financial conditions.
Prior to the release of the GDP data, the Reserve Bank of India's Monetary Policy Committee held its October meeting. Due to ongoing inflation concerns, the committee decided to keep the benchmark interest rate unchanged at 6.5% for the fourth consecutive time.
Shaktikanta Das, the Governor of the Reserve Bank of India, stated that the central bank's monetary policy remains firmly committed to adjusting the inflation rate towards the target of 4%.
Data indicates that India's inflation rate in October fell to 4.87%, the lowest in four months, and remains within the central bank's tolerance range of 2% to 6%.