India's economic growth set to accelerate to its fastest in a year: Report

The April-June quarter saw India’s gross domestic product (GDP) grow at its fastest pace in a year, fueled by services and manufacturing, according to figures anticipated on Thursday, though economists predict a dip ahead.

According to the median projection in a Reuters survey of economists, India’s GDP rose 7.7 per cent in the April-June quarter, up from 6.1 per cent in the previous quarter and the strongest growth since April-June 2022.

As per economists, lower commodity prices helped manufacturers increase margins and offset the impact of 250 basis points of cumulative interest rate increases since May 2022.

According to Suvodeep Rakshit, economist at Kotak Institutional Equities, growth would be driven by services on the output side and investment on the expenditure side.

Strong growth in India's services sector, which accounts for more than half of its GDP, has helped Asia's third-largest economy buck the global slowdown that has left many major economies, including China, faltering.

S&P Global India services Purchasing Managers' Index has remained firmly above the 50-mark separating growth from contraction for nearly two years, the longest stretch since August 2011.

To assist growth, Indian government has been front-loading its annual spending on infrastructure. In the first three months of the fiscal year that started on April 1, India had spent nearly 28 per cent of its capital expenditure budget of 10 trillion Indian rupees ($120.91 billion).

According to Kaushik Das, chief India economist at Deutsche Bank, a 3 per cent decline in wholesale prices will also contribute to the strong headline growth by reducing the "GDP deflator" used to calculate real economic growth by stripping out price changes.

(With agencies inputs)

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