Meanwhile, the real Gross Value Added (GVA) grew by 7.2 per cent in 2023-24 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.
A report from the State Bank of India (SBI) predicted a 7.4 per cent growth in Q4 FY24, pushing the full-year estimate to 8 per cent.
In the previous three quarters, India‘s economy expanded at 7.8 per cent in Q1, 7.6 per cent in Q2 and 8.4 per cent in Q3, on an annual basis. The economy grew by 6.1 per cent in Q4 FY23.
Chief Economic Advisor V. Anantha Nageswaran had suggested that FY24 growth could reach 8 per cent, up from 7 per cent in FY23.
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.
High Expectations
The high expectations of analysts with GDP growth rate can be linked with the robust investment activity in Q4 FY24. According to an ICRA report, India witnessed a surge in the announcement of new projects during the investment meet held in January 2024.
Moreover, an increase in completions of both private and government-led projects had fueled this anticipation.
However, some investment-related indicators moderated in Q4 FY2024 vis-à-vis Q3, along with an implicit slowdown in new project proposals in February-March 2024, relative to January 2024.
This reflected some caution amid the onset of the Model Code of Conduct in March 2024 and the uncertainty owing to the Parliamentary Elections.
“Lower volume growth coupled with diminishing gains from commodity prices dampening the profitability of some of the industrial sectors is expected to dampen India’s GVA growth in Q4 FY2024,” ICRA’s chief economist Aditi Nayar had stated.
“Notwithstanding the overhang of the unfavourable 2023 monsoon rains on agri output, there are some green shoots suggesting that a nascent revival in rural demand may be on the anvil. The domestic retail tractor volumes reverted to a YoY expansion of 7.7 per cent in Q4 FY2024, after contracting by 4.0 per cent in Q3 FY2024,” she added.
The SBI report stated, “As a harbinger of good times, ‘above normal’ monsoon augurs well for the rural economy by boosting domestic supplies of pulses, oilseeds and cereals.”
“The rural economy, on the other hand, is picking up with per cent of indicators showing acceleration increasing to 75 in Mar’24 compared to 56 (60) in Feb’24 (Jan’24). Diesel consumption and two-wheeler sales are showing uptick in rural economic momentum,” highlighted the report.
The expectations of the Reserve Bank of India (RBI) had stated that the Indian economy is likely to witness a growth of around 7.8 per cent in FY24.
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.
(With inputs from agencies)