At 7.8% year-on-year, India's growth rate in the first quarter of 2023-24 towers above the growth rate in several other leading economies, according to chief economic adviser (CEA) V. Anantha Nageswaran.

Overall India's macroeconomic stability and growth prospects are its strong points and the first quarter GDP data has reaffirmed these two key aspects of the government's overall macroeconomic management, particularly during the Covid-19 pandemic years, says Nageswaran.

India's economy in Q1 grew at the fastest pace in a year, on the shoulders of a boost in capital expenditure both at central and state levels, along with stronger consumption demand, especially in rural areas, and improved performance in the services sector, the CEA says.

The biggest positive for the Indian economy is that the private sector capital formation is well underway, the CEA says, adding that this augurs well for future employment and income growth of Indian households.

The new investment projects announced by the private sector have been the highest in Q1 of FY24 in 14 years, he says.

The rural demand for fast-moving consumer goods (FMCGs) has increased especially for high-value goods, Nageswaran says. The same trend is evident for small towns, contributing to growth, he adds. In spite of the global slowdown, the services sector exports have shown a remarkable performance, the CEA says. "Both manufacturing and services sectors are expanding and income growth is evident in the recovery in rural demand."

The CEA highlighted that the residential real estate sector will underpin growth in the construction material sector. The Union government's focus on capital expenditure over the years has crowded in the private sector and it has rubbed off on state governments too, says Nageswaran. However, inflation developments are under control but they bear watching, he cautions.

"Investment and consumer momentum will underpin solid growth prospects over the upcoming year. The private sector is poised to contribute to stronger investment growth following the strengthening of corporate and bank balance sheets, supported by the government's capex push," the CEA says.

According to Nageswaran, food inflation is likely to subside with the arrival of fresh stock in the market and the government's 'pre-emptive measures'. Retail inflation surged to a 15-month high of 7.44% in July from 4.87% in June, breaching the RBI's 6% upper tolerance limit. Inflation in the food and beverages segment more than doubled to 10.6% in July from 4.7% in June led by high vegetable prices.

Expansion of public digital platforms and measures such as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive schemes will boost manufacturing output, he says.

India's economic growth maintained the strong momentum witnessed in the final quarter of FY23, the CEA adds.

Nageswaran was briefing the media after the release of the estimates of Gross Domestic Product (GDP) for the April-June quarter (Q1) of 2023-24 by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation in New Delhi.

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