Industry puts spanner in GDP print

India’s real gross domestic product (GDP) rose 6.3% on-year in the second quarter of fiscal 2023 vis-a-vis 13.5% in the previous quarter. The sharp deceleration was partly because of a high base effect, as GDP had printed 8.4% in the second quarter of fiscal 2022. That said, GDP was dragged down by weakening industrial growth as well, particularly in the manufacturing sector that was hit by slowing global growth and compressed margins.

Weakening industrial activity was the primary drag on GDP growth in the second quarter, while agriculture and services provided support. Industrial activity will continue to face headwinds through next fiscal as waning global growth weighs on export demand. Domestic demand is also expected to feel the pressure next year from external spillovers and tighter domestic financial conditions. Consequently, we expect GDP growth to slow further to 6% next fiscal from 7% in fiscal 2023.