India’s Q2 GDP growth story, in 5 charts | Mint

India’s Q2 GDP growth story, in 5 charts

Manufacturing and construction emerged as the best performers,
Manufacturing and construction emerged as the best performers,


  • India’s GDP growth in the September quarter beat estimates by a huge margin on strong growth in the manufacturing and construction sectors

India’s GDP grew 7.6% year-on-year in the second quarter of this financial year, beating expectations by a huge margin. The growth came on the back of a strong performance in the manufacturing and construction sectors. The growth, only slightly lower than 7.8% in the previous quarter due to the fading of a favourable base effect, was higher than the Reserve Bank of India’s projection of 6.5% and the median estimate of 6.8% as per a Mint poll.

“The surprise was largely led by the manufacturing sector, with growth surging to a nine-quarter high of 13.9% in Q2 from 4.7% in Q1, led by a favourable base, an uptick in volume growth, and an improvement in profit margins owing to continued deflation in input prices," said Aditi Nayar, chief economist, ICRA.

While manufacturing and construction emerged as the best performers, the services and agriculture sectors saw a setback, with their growth printing lower than in the previous quarter. Services growth slowed to 5.8% from 10.3%, while agriculture growth nearly halved to 1.2% from 3.5%.

Even with slower services sector growth, financial services, real estate, and professional services were the biggest contributors to the overall gross value added (GVA) during the quarter. Despite high growth, construction did not feature in the list of top contributors to GVA.

On the expenditure side, both government final consumption expenditure (GFCE) and gross fixed capital formation (GFCF), a proxy for investments, recorded double-digit growth, pushing GDP higher. On the other hand, private final consumption expenditure, a proxy for consumption, faltered, with the growth in this segment falling to 3.1% from 6.0% in Q1.

In terms of current prices, GDP growth was 9.1%, only 150 basis points higher than real GDP growth. This year, the gap between nominal and real GDP growth has narrowed significantly due to the sharp decline in wholesale prices, which constitutes nearly 70% of GDP deflator.

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