The second quarter GDP numbers sprang a negative surprise with real GDP registering a 5.4 per cent growth against 6.7 per cent in the first quarter due to sluggish manufacturing and private consumption.
This is the lowest quarterly growth recorded since Q3 of 2022-23, when the economic output grew at 4.3 per cent. It must be noted that most analysts were expecting the GDP to grow at 6.3 per cent or above. The RBI has predicted the GDP in the second quarter to grow at 7 per cent.
The nominal GDP (GDP at current prices) grew at 8 per cent during the quarter.
Private final consumption grew at 6 per cent during the quarter, lower than the 7.4 per cent growth recorded during the first quarter. The consumption slowdown was despite a lower base of Gross fixed capital formation, which is expenditure on asset creation, grew at 5.4 per cent, down from 7.5 per cent in the first quarter.
Sector-wise, manufacturing gross value addition (GVA) grew at 2.2 per cent in Q2, 480 basis points lower than the growth recorded in the first quarter. Electricity, gas and other utility services also recorded a massive slowdown with Q2 growth at 3.3 per cent compared to 10.4 per cent in Q1. Mining and quarrying recorded a contraction of 0.1 per cent during the quarter.
“The big GDP miss comes from the sectoral hit in the manufacturing sector, something which was somewhat visible in adjusted corporate operating profits. On the expenditure side, private consumption has moderated further, while government consumption has picked up,” noted Madhavi Arora, economist with Emkay Global.
She further adds that private consumption is likely to remain a missing agent for some time. “Urban wage bill growth has been steadily declining on a real basis for more than one and a half years, and currently is well below the 5-yr pre covid avg of 9 per cent,” she added.
In the first half of the financial year, real GDP or GDP at Constant Prices grew at 6.0 per cent, while nominal GDP grew at 8.9 per cent.