The State Bank of India (SBI) has revised its GDP growth projections for 2023-24 upwards to 7%, citing better-than-expected economic growth figures of 7.6% for the second quarter (July to September). This revision is higher than the RBI’s expectations of 6.5% and the SBI’s own earlier forecast of 6.7%.
The strong growth in the second quarter was driven by a rebound in manufacturing, which grew by 13.9%. This is the fastest pace of manufacturing growth in over a decade and suggests that the sector may have finally turned the corner. Other sectors that contributed to the growth include construction (13.3%), mining and quarrying (11.5%), and electricity (10.3%).
Services, which account for over two-thirds of India’s economy, grew by a more modest 5.8%. However, this was still higher than the 5.4% growth in the previous quarter. The growth in services was driven by a pick-up in trade, hotels, and transport.
The strong economic growth is a positive sign for India and is likely to reinvigorate the interests of global corporations, policymakers, investment gurus, and fund managers. The SBI report notes that the government’s PLI (Production Linked Incentive) scheme may have played a major role in the rebound in manufacturing.
Attention is now focused on whether the Indian economy can sustain its strong growth momentum in the second half of the year. The upcoming third quarter (October to December) will be crucial, as it will include the festive season, which is a major driver of consumer spending.
