India’s GDP grew 8.4 percent in the December quarter of FY24, according to the official data released by the Ministry of Statistics and Programme Implementation on Thursday. The Statistics Ministry’s second advance estimates indicate a GDP growth of 7.6%, surpassing the initial estimate of 7.3% released before the Union Budget in January. On the back of good performance by the sectors such as construction, mining & quarrying and manufacturing, India’s economic growth has witnessed significant upswing.
Meanwhile, the growth of eight key infrastructure sectors decelerated to a 15-month low of 3.6 percent in January, primarily due to the underperformance of sectors such as refinery products, fertiliser, steel, and electricity. In comparison, these core sectors experienced a growth rate of 4.9 percent in December, while in January 2023, the growth rate stood at a higher 9.7 percent.
According to a Reuters poll, economists had previously expected Asia’s third-largest economy to grow 6.6% during the final three-month period last year.
According to official data, the government’s fiscal deficit reached Rs 11 lakh crore at the end of January, equivalent to 63.6 percent of the revised annual target. In comparison, during the corresponding period last year, the fiscal deficit stood at 67.8 percent of the Revised Estimates (RE) outlined in the Union Budget for 2022-23. Like the second quarter performance, India has once again retained the world’s fastest-growing major economy tag.
Experts worried about dip in investments
Responding to the surprising uptick in GDP numbers, Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA said, “Amidst the sharp upside surprise in the headline GDP growth number, the contraction in the GoI’s revex and capex, as well as the slide in the core sector growth in January 2024, offer some sobering trends. The Q3 data on India’s growth threw up a divergent trend, with the GVA growth moderating broadly on expected lines to 6.5%, and the GDP expanding by a much higher than anticipated 8.4%. This wide gap followed from a surge in the growth of net indirect taxes to a six-quarter high 32% in this quarter, which is unlikely to be sustainable. In our view, it may be more appropriate to look at the trend in the GVA growth to understand the underlying momentum of economic activity.
With the upside surprise in Q3 as well as upward revisions in H1, the advance estimates for FY2024 GDP growth have been revised up to 7.6% from 7.3%. Private final consumption expenditure growth inched up but remained tepid at 3.5% in Q3 FY2024, with rural demand perceived to be cautious after an unfavourable monsoon and urban demand assessed to be uneven as well.
Investments emerged as the fastest growing component of GDP in Q3 FY2024, and displayed a mild sequential dip, contrary to the sharp slowdown seen in government capex.