With robust development in the manufacturing sector, India’s GDP expanded at a faster-than-expected rate of 7.8% year over year in the January–March quarter. Economists anticipate that this year will see continued strong growth in the economy.
The official data issued on Friday indicated that the gross domestic product (INGDPQ=ECI) growth in the first three months of 2024, the fourth quarter of the 2023–2024 fiscal year, was less than a revised 8.6% expansion in the previous quarter.
It was greater than the 6.7% growth predicted by economists, though.
India’s Robust Economic Growth Bolsters Modi Ahead of Lok Sabha Elections
While gross value added (GVA), which economists view as a more steady measure of growth, increased 6.5% in the October–December quarter, the headline growth rate was bolstered by a steep decline in subsidies. GVA increased by 6.3% during the March quarter.
India’s GDP growth for the entire fiscal year 2023–2024 was revised up from an earlier government projection of 7.6% to 8.2%, the highest among significant economies worldwide.
With the results of the national election set to be announced on June 4, Indian Prime Minister Narendra Modi will benefit from the growth figures. Modi is widely predicted to win a third term.
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Economic Indicators and Election Outcomes: Investors Watch Closely
According to the report, farm output growth accelerated to 0.6% from revised 0.4% growth in the previous quarter, while manufacturing output increased 8.9% year over year in the three months ended in March, up from an earlier corrected expansion of 11.5%.
In order to evaluate any actions taken by the incoming government to stimulate the economy, investors are anticipating the election results and the full-year budget in mid-July.
Following the Reserve Bank of India’s (RBI) record surplus transfer of 2.11 trillion rupees ($25.3 billion) earlier this month, the government is probably going to be able to reduce the fiscal deficit or raise state spending.
RBI Monetary Policy Outlook and Economic Indicators Highlight Mixed Demand Dynamics
At its June 5-7 meeting, the RBI’s Monetary Policy Committee is projected to keep the benchmark repo rate (INREPO=ECI) and open a new tab at 6.50%, provided that inflation stays over 4%, the halfway point of its 2-6% objective, according to experts.
Strong urban consumer demand was evident in April’s high-frequency indicator data, which also included fuel consumption, auto sales, and house loans. However, dismal rural demand persisted despite predictions of an above-average monsoon this year.
The global economy is still strong, as seen by the 5.3% annual growth rate in China’s economy and the 1.3% annualized growth rate in the US economy during the March quarter. These numbers also support expectations of a rebound in India’s exports.
S&P Global upgraded its outlook for India’s sovereign rating on Wednesday from “stable” to “positive,” noting that it expects substantial continuity in fiscal and economic reforms regardless of the results of the country’s elections.
