Economists said that with the first advanced estimate at 7.3 per cent for this fiscal, the second half will see a tad slower number.
Economists lauded India’s real GDP growth in 2023-24 estimated at 7.3 per cent, compared to 7.2 per cent a year ago, as per the first advance estimates of national income released by the National Statistical Office (NSO), which means that India’s economy is poised to showcase strong growth. However, they said that with the first advanced estimate at 7.3 per cent for this fiscal, the second half will see a tad slower number. For FY25, Rajani Sinha, Chief Economist, CareEdge Ratings, said, “We expect real GDP growth in the range of 6.5- 7 per cent. The most important monitorable would be a more broad-based pick up in consumption demand, which hinges on further revival in the informal sector and rural demand. The other critical aspect would be a meaningful pickup in private investment in the coming quarters.”
The outlook by the NSO aligns with the Reserve Bank of India’s (RBI) adjustment of its growth forecast, upgrading it to 7 per cent from the earlier estimate of 6.5 per cent. The growth, per the economists, has been led by the manufacturing sector and construction sector, while there has been some moderation in the services sector growth. “While agriculture growth slowed markedly to 1.8 per cent from the 4.0 per cent last fiscal, the non-agriculture momentum more than offset its impact. Within this, industry, especially construction has emerged as an important driver, while services have seen a moderation. From the demand side, investments have been the bulwark. Private consumption growth at 4.4 per cent has trailed overall GDP growth,” said Dharmakirti Joshi, Chief Economist, CRISIL Ltd.
Here are views from economists/ experts on the GDP estimates:
Aditi Nayar, Chief Economist, Head – Research and Outreach, ICRA Ltd
The Advance Estimates released by the NSO peg GDP growth in FY2024 at 7.3 per cent, much higher than our estimate of 6.5 per cent. Implicitly, the NSO expects the GDP growth to moderate to 7.0 per cent in H2 FY2024 from 7.7 per cent in H1 FY2024. Surprisingly, the estimated GVA growth of 6.9 per cent for FY2024 implies that growth in this metric has been assumed at 6.2 per cent in H2, significantly lower than the imputed GDP number for this period.
In our view, the growth assumed for H2 FY2024 is quite high, given the tepid outlook for agriculture amidst the weak kharif output and ongoing lag in rabi sowing, as well as the feared temporary slowdown in capex ahead of the General Elections. In fact, the GoI’s capex declined by 8.8 per cent YoY during October-November 2023 after rising by 43.1 per cent in H1 FY2024.
Consequently, we believe that the agri and construction GVA growth for H2 FY2024 is likely to print lower than that estimated by the NSO. Besides, we also believe that the growth estimated for the services sector for H2 FY2024 is on the higher side.
The NSO has pegged the nominal GDP growth at 8.9 per cent in FY2024, sharply lower than the 16.1 per cent seen in FY2023, with the deceleration largely on account of the turnaround in the WPI print to a deflation from an inflation in the previous year. Based on the nominal GDP for FY2024 estimated by the NSO, the GoI’s absolute budgeted fiscal deficit of Rs 17.9 trillion works out to 6.0 per cent of GDP, a tad higher than the FY2024 BE of 5.9 per cent of GDP.
Rajani Sinha, Chief Economist, CareEdge Ratings
India’s GDP growth for FY24 as per FAE at 7.3 per cent has come as a positive surprise. The stellar growth has been led by the manufacturing sector and construction sector, while there has been some moderation in the services sector growth. The sharp deceleration in the Trade, Hotel, Transport and Communication segment is not overly concerning as that is because of the high base of last year and some dilution in discretionary demand. Lower growth of the agriculture sector at 1.8 per cent is on expected lines, given the poor monsoon.
The concerning aspect in the GDP data is the weak consumption growth at 4.4 per cent. This would be the slowest consumption growth in the past two decades barring the pandemic year of FY21. Investment has grown by a strong 10.3 per cent led by strong capex by Centre and the state governments. However, for the investment growth to be sustained it is very important for the consumption growth to be bolstered. With global growth remaining weak, India’s export growth has been weak at 1.4 per cent in FY24. The estimated nominal GDP growth of 8.9 per cent raises some apprehensions regarding its potential impact on the fiscal deficit target for FY24.
Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry
The growth in real GDP during 2023-24 estimated at 7.3 per cent by NSO is in line with our expectations and we look forward to a more robust GDP growth in the year ahead, 2024-25. Despite the global headwinds such as the Russia-Ukraine war, the Gaza-Israel conflict, slowing global growth and high-interest rates, the Indian Economy can move fastest among the leading economies.
We appreciate our manufacturing sector for growing at more than 6 per cent. The reforms undertaken by the government since the start of Make in India are becoming visible.
Going ahead, the consistent growth in mining & quarrying, and construction sector, would help the country’s growth to become stronger in the coming years. The gross fixed capital formation at 34.9 per cent of GDP, higher than 34 per cent in 2022-23, is indicating that capacity expansion is on the steady mode and more employment opportunities are on the cards. Reducing the cost of doing business, and enhancing the ease of doing business at the factory level would stimulate the sentiments of the producers for increased capacity expansion and deployment of more workers in their respective factories.
Dharmakirti Joshi, Chief Economist, CRISIL Ltd
Growth forecasts for India were upgraded following the positive surprise in the second quarter, which lifted the first-half print to 7.7 per cent. Now the first advanced estimate pencils in a GDP growth of 7.3 per cent for this fiscal. This implies the second half will see a tad slower number — of 6.9 per cent. We expect the pace of India’s economic growth to slow next fiscal as high interest rates and slowing global growth bite.
Nish Bhatt, Founder & CEO, Millwood Kane International
India’s GDP is likely to grow by 7.3 per cent in FY 24, according to the first advance estimates of annual gross domestic product (GDP) released by the National Statistics Office. The economic growth is largely bolstered by state spending on infrastructure projects amid sluggish consumer spending and due to robust domestic demand and strong growth in the manufacturing and services sectors.
The revised growth estimate follows the RBI’s recent adjustment of its growth forecast to 7 per cent for the current fiscal year, up from the initial estimate of 6.5 per cent, showcasing resilience of the Indian economy and maintaining its status as the fastest-growing major economy.
However, impact on global growth and trade especially through disruptions in the supply chain and the volatile geopolitical situation would have to be monitored.
Source:financialexpress.com