India's Q2 GDP Grows 7.8%... Annual Growth Rate Forecast Maintained at 6.5%

Strong Growth in Service Sector Impact
Poor Harvests and High Inflation Cited as Risk Factors

India's Gross Domestic Product (GDP) for the second quarter (April to June) of this year increased by 7.8% compared to the same period last year. Although strong growth in the services sector continued, there are concerns that the growth momentum may halt due to rising household burdens caused by soaring crop prices and high inflation.

[Image source=Reuters Yonhap News]

According to Bloomberg and other sources on the 1st (local time), the National Statistical Office (NSO) of India announced the previous day that the GDP growth rate for the second quarter of this year was 7.8% compared to the same period last year. This matches the results of a Bloomberg economist survey and is 1.7 percentage points higher than the previous quarter's growth rate of 6.1%. India's economic growth rate recorded 13.1% in the second quarter of last year, then declined to 6.2% in the third quarter and 4.5% in the fourth quarter, before rising to 6.1% in the first quarter of this year.

India's second-quarter economic growth was driven by strong performance in the services sector, including hotels, commerce, and transportation. The financial sector recorded double-digit growth.

The Indian government maintained its annual economic growth forecast for the 2023-2024 fiscal year (April this year to March next year) at 6.5%. Venkatramanan Anantha Nageswaran, the Indian government's chief economic advisor, stated, "Despite downside risks from external factors, the growth outlook for the Indian economy remains bright."

Meanwhile, on the same day, the World Bank (WB) also announced that India's economy grew by 7.8% in the second quarter, mainly supported by strong performance in the agriculture and financial sectors. The WB forecasted that India is one of the fastest-growing economies in the world and will continue to be so. However, it added that rising borrowing costs and inflationary pressures will pose challenges to India's economy this year.

Bloomberg also projected, "Lower-than-usual monsoon rains from June to September and the impact of El Ni?o climate conditions could affect grain harvests, drive up food prices, maintain high inflation, and potentially hurt growth."