Source : The Economic Times
Beating the expectations of analysts, India’s gross domestic product (GDP) grew at 7.8 per cent on an annual basis in the last quarter (Q4) of the FY24. Further, the Centre now estimates the overall growth rate of FY24 to be 8.2 per cent, the Ministry of Statistics and Programme Implementation (MOSPI) data showed Friday.
The data for previous quarter i.e. Q3 that had left experts surprised, has also been revised upwards to 8.6 per cent from 8.4 per cent. Therefore, the growth in the previous three quarters now stand at 8.2 per cent in Q1, 8.1 per cent in Q2 and 8.6 per cent in Q3, on an annual basis.
The GDP growth for FY24 has also been revised upwards to 8.2 per cent from the second advance estimate of 7.6 per cent which was released in February this year (2024).
Meanwhile, the real Gross Value Added (GVA) grew by 7.2 per cent in FY24 over 6.7 per cent in 2022-23. “This GVA growth has been mainly due to significant growth of 9.9 per cent in manufacturing sector in 2023-24 over a contraction of 2.2 per cent in 2022-23 and growth of 7.1 per cent in 2023-24 over 1.9 per cent in 2022-23 for mining sector,” the government said in a press release.
The experts were anticipating a better-than-expected growth for the January to March quarter. The Reserve Bank of India (RBI) estimated Q4FY24 real GDP growth to be 7 per cent while ET Poll suggested the growth rate of 6.8 per cent. As per a Reuters poll, the Indian economy was expected to grow at 6.7 per cent in the January-March quarter on a year-on-year basis, owing to weak demand.
How did economy fare in FY24?
The primary sector sector, constituting agriculture and mining, grew at 2.1 per cent on an annual basis. The agriculture and mining sectors recorded a growth of 1.4 per cent and 7.4 per cent, as against 4.7 per cent and 1.9 per cent, respectively.
The secondary sector, including manufacturing, electricity and construction components, grew at 9.7 per cent on a year-on-year basis. Manufacturing sector witnessed a growth of 9.9 per cent while electricity grew by 7.5 per cent. The construction sector also grew by 9.9 per cent in FY24.
The tertiary sector (including trade and hotels, real estate and defence categories) witnessed a growth of 7.6 per cent on an annual basis. The combined growth rate for category including trade, hotels, transport, communication and services related to broadcasting stood at 6.4 per cent on a yearly basis.
For financial, real estate and professional service category, the growth rate stood at 8.4 per cent. For public administration, defence and other services, the growth rate was recorded at 7.8 per cent.
The growth readings come at a time when PM Modi is seeking a third term after a decade in power. India’s economic progress has been a key pitch for the Modi government in election campaigns.
Experts credit the service sector and public investment for bolstering the latest quarter’s growth from a year earlier. Chief Economic Advisor V. Anantha Nageswaran had suggested that FY24 growth could reach 8 per cent, up from 7 per cent in FY23.
What’s in store for FY25?
For FY25, economists have a positive outlook on India’s economic growth, with a median GDP growth forecast of 6.8 per cent and inflation expected to ease to 4.5 per cent from the current 5.4 per cent.
“We expect GDP growth at around 7 per cent in FY25,” stated Rajani Sinha, Chief Economist at CareEdge. “This is based on expectations of improvement in consumption trends as inflation moderates and agricultural sector performance improves. Given the increased intent to invest by the private sector, we expect a pickup in their capex cycle in the coming quarters.”
The International Monetary Fund (IMF) recently raised its FY25 growth forecast for India to 6.8 per cent from 6.5 per cent estimated in January. The Asian Development Bank (ADB) is even more optimistic, projecting a 7 per cent growth for the fiscal year.
An ET poll showed varied forecasts for FY25, ranging from 6.4 per cent to 7.7 per cent Experts highlight the need for private investment to drive growth. “It is high time that RBI once again moves ahead of the curve, like it did in April 2023 with the pause, and cuts the policy rate, ahead of other major central banks,” said Debopam Chaudhuri, Chief Economist at Piramal Group.
The RBI is expected to maintain the policy rate at 6.5 per cent in its upcoming meeting, with potential rate cuts anticipated later in the fiscal year, after the general elections.
