Three reasons why GDP growth overshot expectations, and why India’s ‘resilience’ comes amid lingering risks

Three key factors contributed to India's strong GDP growth of 7.8% in the April-June quarter, despite the challenging global environment. Firstly, a significant surge in manufacturing and services led the growth rate, with manufacturing expanding by 9.2% and services rising by 10% year-on-year. Secondly, investments, as measured by gross fixed capital formation, grew by 11.9%, more than double the 5.8% growth seen in the same period last year, indicating a healthy investment trend.

Lastly, private consumption also saw a firm increase, bolstering the overall growth. However, India's resilience comes with lingering risks. High crude oil prices, particularly due to tensions between the US and Iran, pose a significant risk to the economy, as they could prevent oil prices from dropping significantly and sustainably below $80 per barrel.

Additionally, rising petroleum product prices and the looming impact of an intensifying El Niño could pose further risks to domestic food inflation and agricultural output.