Economists give a thumbs up to robust FY24 GDP ahead of poll results on June 4; maintain FY25 estimates at 6.5-7%

Economists said that India’s gross domestic product (GDP) growth at 7.8 per cent in the March quarter of the previous financial year, which pushed up the annual growth rate for the whole of FY24 to 8.2 per cent, shows economic resilience. The economists and experts stated that the Indian economy has emerged as an outlier after maintaining the growth rate at a higher level as compared to global economies following the breakout of the pandemic. Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry, said, “India’s growth at 8.2 per cent in FY 2023-24 is a reflection of the efforts for Viksit Bharat by 2047; the growth momentum is expected to continue and strengthen in the coming times. Despite deepening geopolitical distress and global macroeconomic headwinds, India remains resilient. India has become a growth leader among the major advanced, emerging and developing countries.”

As per the data released by the National Statistical Office (NSO), the FY24 GDP growth came in sharply higher than 7 per cent in FY23, driven by a resurgent manufacturing and steady growth in the construction (both sectors grew at 9.9 per cent), and surge in mining activities (7.1 per cent), even as the primary sectors faltered and the key services slowed. Ranen Banerjee, Partner and Leader Economic Advisory, PwC India, said, “The GDP numbers have been buoyed by a strong print in manufacturing supported by a low base given the negative growth printed in previous year. Mining and Quarrying has also helped the higher print. However, all other sectors have printed a decline over previous year and the low prints in agriculture and services are areas of concern.”

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The latest headline GDP numbers got a big boost from buoyant indirect taxes (GST receipts) and lower subsidy outgo, besides deflation in WPI inflation in FY24. Suman Chowdhury, Chief Economist & Head of Research, Acuité Ratings, said, “While the momentum in the economy continues to be strong, there are two factors that had a meaningful contribution to the higher than expected GDP growth numbers in the previous year. One is the deflation or very low WPI inflation witnessed in FY24 which leads to lower differences between real and nominal GDP growth. As WPI inflation normalizes to ~3 per cent or higher, the difference between the two growth prints will revert to the average levels. Secondly, the upside in tax collections and the lower than budgeted subsidy payouts have also helped in elevating GDP growth as compared to GVA growth.”

Furthermore, economists pegged India’s GDP growth for FY25 in the range of 6-5- 7.0 per cent. Here is a look at what economists and experts are saying on the GDP data and the expectations on growth going forward…

Suman Chowdhury, Chief Economist & Head of Research, Acuité Ratings

India has continued to throw a major surprise by recording a GDP growth of 7.8% in Q4FY24 and 8.2% for FY24 as a whole. The GVA growth of 7.2% for FY24 indeed has exceeded most expectations with a robust growth in the manufacturing sector at 9.9% as compared to a negative 2.2% in FY23. This is also despite the 0.6% muted growth in the agricultural sector brought about by the El Nino phenomenon. The upside in the GDP figures have also led to a downward revision in the fiscal deficit to 5.6% for FY24 which augurs well for fiscal consolidation.

While government investments have been a solid support to the economy, we have continued to see a relative weakness in the private consumption expenditure which is now estimated at 4.0%. It’s well known that the rural economy was in a relatively weak spot in the previous year which impacted overall mass consumption.

Given the expectation of a higher than normal monsoon in the current year, we expect a recovery in private consumption in the current year. Nevertheless, we peg the real GDP growth for FY25 at 6.8%, given the high base factor at play.

Shreya Sodhani, Regional Economist, Barclays

Q1 24 GDP growth surprised to the upside, as has been usual over the last fiscal year, at 7.8% y/y, implying FY23-24 growth averaged 8.2%. Both GVA growth and the domestic demand contribution to headline growth reduced a bit from Q4. We still forecast FY24-25 growth at 7.0%, and expect the MPC to take comfort from this print.

Despite stronger-than-expected print and consequent high base, we maintain our FY24-25 GDP growth forecast at 7.0%. We expect the steady domestic growth momentum to continue, supported by 1) continued increases in government capex (albeit at a slower pace), 2) the much-anticipated rising private investment, 3) some recovery in rural consumption, even if cyclical, and 4) recovery in exports with the uptick in global trade. That said, our monetary policy expectations suggest rates will remain elevated for longer, creating some headwinds for growth, as reflected in our forecast moderation in growth between FY 23-24 and FY 24-25. In addition, softening GVA for three straight quarters (Q1-Q3 FY24), suggest growth could ease from FY24. The print suggests growth is moving faster than expected by the RBI, which means the central bank should see little urgency to cut rates while the MPC awaits for comfort on headline inflation. In our view, the MPC will likely vote 5-1 to keep the policy mix unchanged at its meeting next week. We also do not expect the bank to reduce rates before Q4 24 given its own inflation trajectory and persistent upside surprises in growth.

Dr Manoranjan Sharma, Chief Economist, Infomerics Ratings

The manufacturing sector grew robustly by 9.9% in 2023-24. Multiple high-frequency indicators strongly suggest that the Indian economy continues to be resilient and buoyant despite global headwinds, e.g., heightened global tension because of the Israeli- Hamas/ Iran war, slow growth across countries, geopolitical fragmentation and volatility in oil prices. India is likely to grow by 7% in FY25. Welcome that India’s FY24 fiscal deficit is at Rs 16.54 lakh crore, 95.3% of the revised estimates.

These are impressive and reassuring numbers and clearly demonstrate that high and sustained growth is here to stay in India. Such outperformance will consolidate India’s position in the global pecking order and will have a salubrious impact on economic growth, structural transformation and distributive equity. Way to go!

Dr Ravi Singh, SVP – Retail Research, Religare Broking Ltd

India’s Q4 GDP came well above the estimate and expectations. The robust and widespread bottom-line growth evident in corporate results has already poised an optimistic outlook in the industry. Looking at the momentum of economic activity and several early data points and indicators that have emerged, we get the validation in the numbers. The strong growth in construction and manufacturing activities and government spending has contributed towards this growth in Q4. With this growth momentum, the Indian economy has again managed to retain its tag of being the fastest growing major economy in the world.

Dharmakirti Joshi, Chief Economist, CRISIL Ltd

India’s growth continues to surprise on the upside. Despite a poor showing by agriculture, provisional estimates peg India’s GDP growth for fiscal 2024 at 8.2%. This beats the 7.6% growth estimated by the National Statistical Office (NSO) in February. To be sure, provisional estimates provide a better estimate with updated data and have longer shelf life as the next estimate for fiscal 2024 from NSO will come only in 2025.

Although real GDP is still around 7.5% below where it would have been without the pandemic, domestic strengths and policy focus have put the economy on a healthy growth trajectory and is trimming the permanent loss of GDP from the pandemic.

Signs of a mild slowdown were seen in the fourth quarter, when GDP grew 7.8% and gross value added (GVA) 6.3%. The growth moderation was seen across industry and services. From the demand-side, investment growth moderated this quarter.

We expect growth to moderate to 6.8% in the current fiscal, with high interest rates and lower fiscal impulse (as the deficit is trimmed to 5.1% in fiscal 2025) tempering demand in non-agricultural sectors. Agriculture, however, is expected to improve its performance in the current fiscal on the back of normal monsoons and a favorable base effect. Agriculture grew at 1.4% in fiscal 2024, much below its pre-pandemic decadal average of 4.4%.

Aditi Nayar, Chief Economist, Head of Research and Outreach, ICRA Ltd

While the growth in India’s GDP and GVA moderated to a four-quarter low of 7.8% and 6.3%, respectively, in Q4 FY2024 from the revised prints of 8.6% and 6.8% in Q3, it exceeded both our and market expectations. The wedge between the two narrowed only slightly to 148 bps from 178 bps in Q3, amid the high 22.2% growth in net indirect taxes in real terms. With such a high growth of net indirect taxes unlikely to sustain in FY2025, we expect GDP and GVA growth to print closer to each other, especially in terms of the annual numbers.

The sequential deceleration in GVA growth was largely driven by the industrial sector, reflecting both a moderation in volume growth as well as the narrowing deflation in industrial raw material inputs in Q4 FY2024 vis-à-vis Q3. Nevertheless, the expansion in manufacturing and construction remained quite robust, printing at above 8.0% in the quarter.

The agri-GVA growth was revised up for Q3 FY2024, amid the upward revision in the output of crops in the Second Advance Estimates (AE) vis-à-vis the First AE. The lingering impact of the unfavourable 2023 monsoon was seen in the performance of the agri sector, which just eked out a 0.6% YoY rise in Q4 FY2024.

The sequential slowdown in GDP growth was driven by investment activity, even as private consumption maintained a bland 4.0% rise and government consumption expenditure turned around to a mild growth from a contraction.

With transient factors likely to dampen growth in H1 FY2025, we expect the GDP growth to decelerate from the 8.2% recorded in FY2024.

Gaura Sen Gupta, Chief Economist, IDFC FIRST Bank

Growth was led by private consumption and investment in contribution terms. Private consumption growth held steady in Q4, likely reflecting pick-up in rural expenditure and moderation in urban expenditure. Investment growth was softer in Q4FY24, reflecting slowdown in Centre and state capital expenditure.

The wedge between GDP and GVA growth persists, with GVA growth moderating to 6.3%YoY in Q4FY24 v/s 6.8% in Q3 (revised-up from 6.5%). The divergence between GDP and GVA is due to net taxes less subsidies which jumped by 22.2%YoY, boosting GDP growth. The increase is due to sharp decline in subsidy expenditure in Q4 (-24%YoY in Q4FY24 and -54% in Q3, in nominal terms) and pick-up in indirect tax collections.

The fluctuation in net tax collections (less subsidies) has added a lot of volatility in the GDP print in H2FY24. Instead, GVA would be a better metric to look at while assessing growth as it’s not impacted by fluctuation in net tax collections.

Full year FY24 GDP growth was at 8.2% (v/s 7.0% in FY23), which was higher than the advanced estimate of 7.6%. FY25 GDP growth estimate is retained at 6.5% (with upside risk). The RBI dividend which significantly exceeded expectations, provides fiscal space of 0.2% of GDP. Whether this is used to cut borrowings or boost expenditure (or both) will be clear once the final budget is presented.

Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry

India’s economy is becoming more and more robust as growth is strengthening quarter after quarter; the Q4 growth at 7.8% indicates a strong growth trajectory to continue in the coming quarters too. Manufacturing, construction and electricity sectors have become the major growth drivers in the recent quarters. The overall real GDP growth at 8.2% in 2023-24 is highest among the leading advanced, emerging economies. The manufacturing sector has grown at 8.9% in Q4 2023-24 on the back of strategic reforms and prudent policy measures by the government and efforts of industry. The consistent growth in the construction sector is indicating the creation of new employment as the construction sector absorbs skilled, semi-skilled and unskilled chunks of the workforce.

Sanjay Nayar, President, ASSOCHAM

GDP numbers for the fiscal 2023-24 give us further confidence about the inherent strength of our economy, leveraging our ambitious goals for our aspirational human resource. The optimism for sustaining a growth momentum also stems from a good beginning by the core sector industries like steel, electricity etc which have shown a combined expansion of 6.2 per cent in April, 2024 over the previous fiscal.

Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE

The GDP numbers indicate that the Indian economy has emerged as an outlier after maintaining the growth rate at a higher level as compared to global economies following the breakout of the pandemic. The country’s growth story continues to be aided by strong domestic demand coupled with strengthening activity in the services sector. Outlook for investment and consumer momentum too is expected to underpin solid growth prospects. Emerging economic trends indicate that India continues to be on its expansion trajectory.

Economists give a thumbs up to robust FY24 GDP ahead of poll results on June 4; maintain FY25 estimates at 6.5-7%

The economists stated that the Indian economy has emerged as an outlier after maintaining the growth rate at a higher level as compared to global economies following the breakout of the pandemic. Furthermore, economists pegged India’s GDP growth for FY25 in the range of 6-5- 7.0 per cent.