India’s economy expanded at its fastest rate in a year in the June quarter, with GDP growing 7.7 per cent, up from 6.1 per cent in the previous quarter and the fastest since April-June 2022.

Lower commodity prices allowed manufacturers to increase margins and partially offset the 250 basis point increase in interest rates since May 2022.

Services will drive growth on the output side, while investments will drive it on the expenditure side. India, the third-largest economy in Asia, has been able to defy the global slowdown, with its services sector experiencing strong growth.

The Indian government has been investing more money in infrastructure each year to support growth, spending nearly 28 per cent of its Rs 10 lakh crore capital expenditure budget in the first three months of the fiscal year.

The “GDP deflator,” which estimates real economic growth by excluding price changes, will be reduced by a 3 per cent decline in wholesale prices.

However, the price effect may change in the upcoming months, and growth may be slow. August has been unusually dry after above-average rainfall in July, driving up the cost of basic foods and reducing discretionary spending. Dry weather in India’s hinterlands, where agriculture provides the majority of the country’s income, could also reduce agricultural output and weaken the power of locals. A comparison to higher growth rates from a year ago, slowing exports and global growth will also impact future quarters’ growth.