The Modi government may be chuffed about the robust second-quarter growth in GDP (gross domestic product) at an unanticipated 7.6 per cent — well above the Reserve Bank of India’s (RBI) forecast of 6.5 per cent and just marginally below the 7.8 per cent growth in the April-June quarter.

But things are not looking hunky dory.

Economists are of the view that the growth rate could moderate in the second half due to soft demand from rural India and globally, with the latter on account of the slowdown that major economies are facing. Experts also cite certain high-frequency indicators (HFIs) which are suggesting that some weakness has started to creep into the growth figures.

“HFIs for November 23, however, suggest a deceleration in growth. Therefore, we expect growth to ease to 5.8 per cent year-on-year (YoY) in the third quarter of 2023-24. We do expect some slowdown in growth in the second half of 2023-24,” Motilal Oswal said.

The brokerage pointed out that six out of 10 key indicators reflect a decline in economic activity.

While rail freight and passenger traffic witnessed contraction for the first time in four months, commercial & passenger vehicle sales and power generation growth decelerated sharply during the month. Further, the water reservoir level continued to contract for the ninth consecutive month. Manufacturing PMI increased, Vaahan registrations witnessed double-digit growth and toll collections and air cargo traffic remained robust.

“There are some evident fault lines in the latest data which may impinge on the growth momentum,” Devendra Pant, chief economist, India Ratings and Research said.

“The persistence of the skewed nature of consumption demand is problematic, as it is led by the households belonging to the top 50 per cent of the income bracket.

“Finally, the normalisation of pent-up demand in the employment-intensive trade, hotels & restaurants points towards a slowdown in the momentum of the services sector which was the last to recover after Covid-19. We believe that the strong growth witnessed in the first half may not hold in the second half.’’

Aditi Nayar, chief economist, Icra, said growth will moderate in the second half of this year with continuing headwinds such as the normalising base, weak outlook for agri output and rural demand.