India’s growth talks are no longer a hypothetical digit but rather a reality in itself. The 8.4% came out as a surprising one from October to December quarter last year and the part contribution comes from manufacturing and construction activity.
While the economists predicted the estimates of GDP growth to be 6.6%, it has surpassed that number even when compared to the previous quarter results. 8.4% is not a small deal to not look at and the honorable Prime Minister Narendra Modi tweets about it: “Robust 8.4 percent GDP growth in Q3 2023–24 shows the strength of the Indian economy and its potential.”
The contributing sectors stated above grew 11.6% and 9.5%, respectively, to arrive at the massive GDP growth, which is higher in the 6 quarters. The robustly growing number calls for a revision of the estimated growth for the current year’s expectations. It is projected to be 8.2 percent, up from 7.8 percent for the July–September quarter.
India’s growth rally is exuberant
The Investment Performance Adds to This!
That said, the strong point seen for growth has come from the investment performance. This indication is from the Gross Fixed Capital Formation.
It is the economic indicator that measures the total physical asset value that is yielded within the country over a specific time with a deduction of depreciation from it. In other words, there is an increase in net physical capital from the investment in those assets that gave such production to the economy. So it gives you an outlook on the investment activity in the economy.
In the fourth quarter of the fiscal year (23–24), this has grown by 10.5% when compared to the previous result of 11.6%. It technically matches the previous result, which shows the status of the economy’s investment mode, which is a contribution of a third of India’s GDP.
RBI’s status quo: No changes in current policy
Speaking of How the Bond Market Responded
A good growth means expecting something good that the market must do, but how did the Indian bond market react? It wasn’t extreme but showed limited reaction to it.
Its response has just been much more significant but muted to both US data and domestic economic data. So this left the benchmark 10-year bond yield at 7.068%, which was previously at 7.0764%.
Well, quite beyond that, the bond market yield will also depend on other factors, such as central bank policies and global economic conditions. In the US, the PCE price index rose to 0.3% compared to a 0.1% rise in the previous quarter, which was modest and didn’t modify the rate cut expectation of the FED. Nearly no changes can be seen in the central bank’s strategy just yet.
Bond market will now look more attractive to the private sector
The Wrap
Recently, when the RBI repo rate remained unchanged at 6.5%, the main focus on bringing inflation to 4% has been the latest discussion so far. The government, to reduce the fiscal deficit, is also aiming to borrow less in the fiscal year 2024–25, which gives the Indian corporate bond market an edge this time. The foreign inflow of money due to the inclusion of Indian sovereign bonds in the JP Morgan index will grow significantly.
All the news is signaling a positive indication and there is nothing negative at the moment in the Indian market. The bond market participants might react to the GDP growth quite late. We might need to wait for any action or decision from the central bank on this.
Although the GDP has grown quite significantly, in the coming quarters it is set to ease, but at the moment, Indian bond market reactions await, unlike the equity market, which broke record highs for this news.
