Q2 FY24 GDP growth at 7.6% is phenomenal but...

Govt has released the official NSO estimates for Q2 FY24 GDP growth rate at 7.6% which is a tad lower than 7.8% GDP growth in Q1 Fy24.

This figure is stupendous but what are the pin pricks in sustaining this high growth trajectory in H2.

1)Agricultural GDP growth has faltered to 1.5% due to truant monsoon rains;

2)Personal final consumption expenditure grew at 3.1% as against 6% in the Q1.

3)Government Investments and Government Consumption have picked up due to higher fiscal deficits budgeted for the year;

4)despite higher Personal loans, Vehicle loans etc given by NBFCs and Banks ,why Personal Consumption is languishing- Is it because of higher inflation due to food &fuel?Are the new loans taken to payout old loans leading to recycling of loans?

5)Only Urban Consumption expenditure is showing some significant traction but Rural consumption is still tepid and low.

6)Unemployment rate is holding steady but still not falling significantly. Moreover the Wage earnings over the years have not grown significantly for those employed at lower levels and therefore, this has not enabled them to generate higher disposable and discretionary incomes.

The above questions point to a situation where the GDP growth is on high steroids of Government expenditure fuelled by high Fiscal deficit budgeted.

If Governments &PSUs spending on Capex falter in the years to come, the GDP growth may also fall in tandem.

In nutshell, the GDP growth is largely confined to Urban segments and sectors and the people who are dependant on it , thereby sidestepping rural India's huge population.

Courtesy: Crisil Research

IMHO, the above crude analysis may be wrong and if proven wrong in the medium term when the Fiscal deficit levels are brought down, I will be definitely happy.

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