India’s economic growth picks up on rising government, consumer spending
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Workers are silhouetted against the setting sun at a construction site in Pushkar. India’s economy grew by 6.2 per cent in October-December.
PHOTO: AFP
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NEW DELHI – India’s economy grew by 6.2 per cent in October-December, marginally below expectations but faster than in the previous quarter on the back of increased government and consumer spending, official data showed on Feb 28.
A stronger rural economy also bolstered the world’s fifth-largest economy in the final quarter of 2024.
Manufacturing growth, however, remained subdued, and the overall rise in gross domestic product (GDP) was well below peak quarterly growth rates seen in the three years after the pandemic.
“GDP figures show that India’s economy remained fairly soft by its own standards at the end of (2024). But with policy now decisively turning more supportive, economic growth should pick up further over the coming quarters,” Capital Economics’ Mr Harry Chambers said.
India is still the world’s fastest-growing major economy, but it also faces uncertainties over its trade with the United States and the Trump administration’s plans to impose reciprocal tariffs.
GDP growth in October-December was slightly lower than the 6.3 per cent expansion projected by analysts in a Reuters poll, and the central bank’s estimate of 6.8 per cent. The economy grew 5.6 per cent in the previous quarter.
The gross value added, a measure of economic activity which is seen as a more stable measure of growth, grew 6.2 per cent in October-December, compared with a revised 5.8 per cent expansion in the previous quarter.
For the full year, the government now pegs GDP growth at 6.5 per cent, marginally higher than its initial estimate of 6.4 per cent, but below the revised growth rate of 9.2 per cent for 2023-24.
Government spending rose 8.3 per cent in the last three months of 2024 from a modest 3.8 per cent increase in the previous three months.
Private consumer spending jumped 6.9 per cent year on year, up from 5.9 per cent in the previous quarter, buoyed by improved rural demand due to moderating food prices and more spending on purchases for the festival season than a year earlier.
The October-December GDP growth is “marginally better than our expectations,” said Ms Gaura Sen Gupta, chief India economist at IDFC First Bank.
She attributed the pick-up to the agriculture sector and to a revival in rural demand.
Agricultural output rose 5.6 per cent year on year from a revised 4.1 per cent in the previous quarter, but growth in manufacturing, which contributes about 17 per cent of the economy, remained subdued at 3.5 per cent against 2.2 per cent in the previous quarter.
To boost the economy, India’s central bank in February cut interest rates for the first time in nearly five years.
The monetary policy committee’s deliberations left the door open for further rate cuts, with most members focused on supporting growth as inflation, which fell to 4.3 per cent in January, eases.
Personal income tax cuts announced in the country’s annual budget on Feb 1 are also seen aiding consumption.
Urban demand is poised for a recovery, helped by an easing in inflation and a boost to disposable incomes from the income tax relief, the central bank said in its latest monthly report.
Economists see at least one more rate cut in April, when the monetary policy committee meets next, according to a Reuters poll.
“While this growth print brings some relief for the central bank, given continued global headwinds, we expect another rate cut in April 2025,” said HDFC Bank principal economist Sakshi Gupta. REUTERS
