India’s GDP growth hits again
Indian economy has once again made its strength felt. While many countries of the world are struggling with recession, India’s villages and government spending have breathed new life into the economy. According to the latest estimates, India’s growth rate (GDP) is expected to be 7.3% in the second quarter (July-September) of the current financial year. If this happens, then it is a relief news for everyone, from the common man to the market. The National Statistical Office (NSO) will release its official figures on November 28, but trends show that good days are returning.
Growth is better than RBI’s expectation
This time’s rise is not just a coincidence. Economists estimate that the growth rate could range between 6.9% to 7.7%, with an average of 7.3%. The thing to note is that Reserve Bank of India (RBI) had also estimated a growth of 7%, but the reality seems better than this.
In comparison, the pace of GDP in the same quarter last year was 5.6%. At the same time, in the April-June quarter this year it was 7.8%, which was the fastest in the last five quarters. Rajni Sinha, chief economist of CareAge Ratings, says that the growth in sectors like farming, manufacturing and construction has given this strength to the economy.
When money came into the pockets of the villages, the market started running.
The real hero of this time’s growth story is the ‘village’. According to Yuvika Singhal, economist at QuantEco Research, the spending power of people has increased due to reduction in inflation and increase in wages in rural areas. Besides, relief in income tax and expectation of good harvest have also played a big role in this.
Despite difficulties like heavy rains and American tariffs, demand remained in the Indian market. This clearly shows that consumption has strengthened in both rural and urban areas. The wheel of the economy turns only when the common man spends.
Impact of tax changes
The change in GST rates in the month of September also supported the market. The simplified GST structure of 5% and 18%, which came into effect from September 22, made many household items cheaper. Economists believe that stock (inventory) accumulated by shopkeepers before festivals and rationalization of GST have accelerated economic activities.
Its direct impact was visible on industrial production. The Index of Industrial Production (IIP) recorded an average growth of 4.1%, which was 2.7% last year. At the same time, the manufacturing sector has grown at the rate of 4.9%.
The government has also opened its treasury. Government capital expenditure (Capex) has increased by 31%. Although this is less than 52% of the previous quarter, it is much stronger than last year.
US tariff challenge
India has made a comeback on the export front. Merchandise exports have increased by 8.8%, whereas last year there was a decline of 7%. However, the 50% tariff imposed by the US and penalty on Russian oil remains a challenge. Nomura economist Aurodeep Nandi believes that if a trade deal is made with America, exporters can get a big relief.
The picture is bright for the next financial year (FY26) also. Economists are seeing a growth of 6.9%, while the World Bank and IMF have considered India as one of the fastest growing major economies in the world. Upasana Bhardwaj of Kotak Mahindra Bank says that the pent-up demand due to GST will continue till the third quarter, but the real test will be after the fourth quarter.