INSUBCONTINENT EXCLUSIVE:
3 min read Last Updated Aug 30 2024 | 11:39 PM IST
Increased capital expenditure (capex) by the private sector and households lifted
growth in capital investment to 7.5 per cent in Q1FY25 (April-June) from 6.46 per cent in the preceding quarter, the data released by the
National Statistical Office (NSO) on Friday showed.
Gross fixed capital formation (GFCF), which represents infrastructure investment,
contributed 31.3 per cent to gross domestic product (GDP) in Q1FY25, as against 31.5 per cent in the preceding quarter.
An investment
share above 30 per cent is considered important for driving economic growth.
The rise in capital investment during Q1 comes even as
capital expenditure by the central government declined owing to the general elections.
The data sourced from the Controller General of
corresponding period last year.
Rajani Sinha, chief economist, CARE Ratings, said GFCF exhibited robust growth during Q1, surpassing the
This suggests increased capex by households and the private sector
Notably, household investment in real estate has remained particularly strong after the pandemic ebbed.
Echoing similar views, Madan
Sabnavis, chief economist, Bank of Baroda, said capital formation showed steady growth due mainly to housing and private
consumption expenditure (PFCE), which is taken as a proxy for household consumption, grew strongly to a seven-quarter high of 7.4 per cent
during Q1FY25 from 3.9 per cent in Q4FY24, due to a partial correction in skewed consumption demand.
The share of PFCE in GDP rose to
nature of consumption growth is correcting somewhat with the pickup in two-wheeler sales, etc
The quarterly results of fast-moving consumer goods companies also point to revival in rural demand, which is favourable both for
ICRA Ratings, said the increase in PFCE was surprising, given the moderation in urban consumer sentiment and sporadic heatwaves, which
added.
However, government expenditure, measured by government final consumption expenditure (GFCE), contracted (-0.24 per cent) during
contractionary fiscal policy
For three consecutive months (May-July 2024) expenditure growth has been negative
However, this is more due to negative capex growth, and capex growth picked up in July and this will result in expenditure growing, albeit
