India’s economy performed well by growing at the rate of 7.8 per cent in the first quarter of financial year 2023-24, thanks to a significant increase in private consumption, government capital expenditure, financials and services. Though the current growth rate pales in comparison with 13.1 per cent expansion in the economy witnessed in the first quarter of FY 2022-23, it still keeps India steady as the world’s fastest-growth major economy in the world ahead of China with a 6.3 per cent growth rate.
The numbers of this quarter present a real picture of the economy as against those in the previous fiscal year because both the periods being compared are from the post-Covid era. The key data points that give confidence in the country’s economic growth journey are government consumption stabilizing at 10 percent of the GDP and private consumption taking the lead at 58 per cent. The manufacturing sector too has grown at a decent rate of 4.7 per cent. Though it could grow faster, the current growth rate is not bad when seen in the background of a worsening global economic scenario.
The central government fiscal deficit for the first four months of the financial year stays at 33 per cent, which gives confidence to investors that the government is committed to stay anchored to its stated fiscal deficit policy.
The real cause of concern for the economy emanates from the path of inflation and exports. According to the government data, exports constituted 20 per cent of the economy in the April-June quarter of the financial year 2024 as against 24 per cent in the year ago period, which translates into a drop of Rs 70,000 crore worth of business for the economy in just four months. Unless the global economic growth improves, India would continue to experience stress in the export sector and impair its growth potential. However, as the services sector has finally come out of the Covid shadow to support the economy, it is time for cautious optimism.
