Economic activity in India reached a six-month high, with a year-on-year (YoY) growth of 10.6 per cent in August 2023, up from 8.1 per cent in July 2023, according to the ICRA Business Activity Monitor. The index, which relies on high-frequency indicators, attributes this increase to several factors, including a lack of rainfall’s positive impact on non-agricultural sectors, healthy domestic demand, and a rise in non-oil exports. Twelve of the 16 constituent indicators of the index reported improved performance in August compared to July, with eight showing double-digit growth.
The index also showed robust trends in month-on-month (MoM) growth and expansion over pre-COVID-19 levels. It rose by a healthy 3.2 per cent on a MoM basis in August 2023, compared to a 0.9 per cent increase in August 2022. Additionally, the index expanded by approximately 29 per cent over pre- COVID-19 levels of 2019, up from 22 per cent in July 2023. All the non-financial indicators exceeded their pre-COVID-19 volumes for the first time since the pandemic began, as per ICRA.
However, this upward momentum may not sustain into the second half of the financial year 2024. Factors such as sub-par monsoon, cumulative monetary tightening, and a potential slowdown in government capital expenditure as the 2024 general elections approach could dampen economic activity.
