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CareEdge Research Report
India's economic growth accelerated to 7.8% in the first quarter of FY24 from 6.1% in the previous quarter. It was broadly in line with our expectation (7.7%). A supportive base along with continued strength in services and construction activities supported the growth.
Encouragingly, the manufacturing sector maintained the pace gaining from favorable demand conditions and lower input prices. This was also captured in the improvement in corporates' profit margins during the quarter.
On the expenditure side, a pick in private consumption was a positive development. Private consumption expenditure grew by 6%, up from a muted growth of 2.8% a quarter ago.
Broadly, it was led by discretionary demand by urban consumers as reflected in healthy numbers for air and railway passenger traffic, growth in retail credit and passenger vehicle sales. Some pick-up in rural demand was also witnessed during the quarter with higher growth in production of consumer non-durables and improvement in two-three-wheeler sales.
It remains to be seen if the strength will be sustained given the emerging challenges on the inflation front. Though moderation in Consumer price index-core inflation and Wholesale price index deflation are comforting factors for urban consumers and producers, high food inflation for a prolonged period could hamper rural demand.
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