Private consumption has emerged as the key driver of India’s growth momentum, with Real PFCE rising 7.9 per cent in Q2 against 6.4 per cent last year, and expected to sustain in the current quarter.
Buoyed by secondary and tertiary sectors of the economy, real GDP growth for the second quarter of the current fiscal exceeded expectations to come at 8.2 per cent, according to data from the Ministry of Statistics and Programme Implementation (MoSPI). This lifted first‑half growth to 8.0 per cent, well above the 6.1 per cent recorded in the same period last year.
Nominal GDP growth stood at 8.7 per cent, marking the narrowest gap with real GDP since 2020, reflecting easing inflationary pressures.
In a statement on X (formerly Twitter), Union Finance Minister Nirmala Sitharaman said, “In the current financial year, Real GDP has registered 8% growth rate in the first half (April-September). The growth has been driven by sustained fiscal consolidation, targeted public investment, and various reforms that have strengthened productivity and improved ease of doing business. Various high‑frequency indicators also point to continued economic momentum and broad‑based consumption growth.”
The secondary sector provided strong support, with manufacturing expanding 9.1 per cent and construction rising 7.2 per cent at constant prices. The tertiary sector also delivered, led by financial, real estate and professional services at 10.2 per cent. Agriculture and allied activities grew at 3.5 per cent, while utilities registered 4.4 per cent growth.
Consumption‑Led Growth Momentum
Dharmakirti Joshi, Chief Economist at the advisory Crisil, observed, “Private consumption was the main driver of higher real growth. From the supply side, manufacturing and services saw a significant rise. There was a prop from statistical low‑base effect as well, as the economy grew at a below‑average 5.6 per cent in the same quarter last fiscal.”
Real Private Final Consumption Expenditure (PFCE) grew 7.9 per cent in Q2, compared to 6.4 per cent in the same period last year. Crisil expects this momentum to continue into Q3, supported by GST rate rationalisation, lower income tax, and repo rate cuts by the RBI’s Monetary Policy Committee. While government investment is expected to stabilise, Joshi noted “hints of a belated uptick in private investments.”
Crisil has raised its full‑year GDP forecast to 7.0 per cent, up from 6.5 per cent, factoring in strong first‑half growth and a projected slowdown to 6.1 per cent in H2 due to global headwinds and normalisation of public capital expenditure. Joshi cautioned that slower nominal growth, driven by declining inflation, could have fiscal implications. He also flagged that the upcoming revision of the GDP base year to 2022-23 from 2011-12 may improve indicator accuracy but could cause deviations from current estimates.
– Manish Pant