India's twin growth engines face turbulent weather

India’s gross domestic product grew 7.8% in the April to June quarter, its fastest pace in a year. The print preserves the South Asian nation’s title for the fastest-growing major economy, yet the eye-popping level may not sustain.

A patchy monsoon and high food costs threaten the twin engines behind the latest headline figure. Indians have less money to spend as soaring prices bites into family budgets. Meanwhile, El Nino weather conditions mean the winter agriculture crop could be as weak as the summer yield, keeping prices high for longer. Impending state and national polls may force Prime Minister Narendra Modi’s government to cut capital expenditure to deploy further funds for relief: this week it amped up the generosity of a cooking fuel subsidy. Weak external demand is a problem too. Exports fell 7.7% and commentary from outsourcing giants like Tata Consultancy Services (TCS.NS) suggests a muted outlook.

Modi will want consumers to spend enough through the September-December festival period to ensure growth hits the Reserve Bank of India’s 6.5% forecast for the year to March 2024 and he will be reluctant to forsake his government’s fiscal deficit target of 5.9%. Growing is a given, but it will take harder work.