Growth momentum continues, but private consumption and capex weak

Momentum may not sustain into next year; policymakers should stay vigilant and build buffers

Since the October Monetary Policy Committee (MPC) meeting, gross domestic product (GDP) growth in Q2 of 2023-34 (FY24) has come as a surprise, rising to 7.6 per cent year-on-year (Y-o-Y).
 

With strong momentum continuing so far into Q3, this suggests that FY24 GDP growth will likely rise closer to 6.7 per cent Y-o-Y (Reserve Bank of India or RBI estimates it to be 6.5 per cent).
 

However, growth intervals in Q2 were less encouraging, with demand primarily driven by the government, both on consumption and investment.
 

However, private consumption and private capex remain weak. We believe the current strong growth