India’s robust growth figures come at a time when major global economies are facing slowing growth and steep interest rates. The International Monetary Fund (IMF) has predicted that the Indian economy will outperform majuor economies like China (4.6%), the US (2.1%), Japan (0.9%), France (1%), the UK (0.6%) and Germany (-0.5%) in the FY24.
The manufacturing sector, which accounts for about 17% of the economy, expanded 11.6% year-on-year in Q3, but that came on the back of a negative 4.8% growth clocked in Q3 of FY23.
Agriculture sector growth receded 0.8% in the December quarter of this fiscal, down from 5.2% in the same quarter of the previous year due to uneven monsoon in parts of the country. “Agricultural GVA growth will impact rural consumption demand, which is already reflected in overall consumption growth of 3% in FY24. A longer period of low agriculture growth may translate to weaker consumption demand in the economy,” said Devendra Kumar Pant, chief economist at India Ratings, adding that revival in rural consumption demand will be critical going forward.
Meanwhile, the agriculture and farmers’ welfare ministry late on Thursday evening pegged foodgrain production at 309 million tonnes for the 2023-24 crop year (July-June), a decline of 6.1% on year.
Gross fixed capital formation (GFCF), which is an indicator of the level of investments in the country, picked up pace at 32.4% on an annual basis in the December quarter. But it slowed marginally from 34.3% reported in the previous quarter.
The government’s final consumption expenditure stood at ₹3,41,625 crore during Q3, down from 3,52,789 crore from the same period of the previous year, registering a marginal decline on an annual basis. Household consumption or private final consumption expenditure saw a 4.4% decline in the December quarter.
During the quarter, the share of exports in GDP stood at 22.2%, lower than 23.3% in the same quarter of previous year.
Vivek Rathi, National Director Research, Knight Frank India, said the GDP growth numbers indicated strong economic momentum, especially when the current global economic landscape is still volatile.
“The increase in domestic manufacturing and the ongoing upswing in the real estate sector and increased infrastructure activities are expected to further boost growth in the respective sectors. However, the moderate growth of 3.5% in domestic private consumption can be concerning as it is the key engine of economic growth. For most of the domestic consumption had remained under stress due to exceedingly high inflation,” Rathi said.
Some economists, though, expect the numbers to moderate going forward. “Though the numbers have shown a healthy growth rate, going forward we expect moderation in the number due to multiple headwinds coming from affected kharif crops, weak rural demand, poor performance from industrials, and also global headwinds,” said Raghvendra Nath, MD, Ladderup Wealth Management.
Upasna Bhardwaj, chief economist, Kotak Mahindra Bank said, “The sharp upward revision to the GDP comes on the backdrop of downward revision to FY23 figures and stronger investment and net exports in FY24 but lagging consumption. More intriguing is that FY24 GVA estimates have been left unchanged while GDP is sharply higher.”
Manoranjan Sharma, chief economist at Infomerics Ratings, said the rise in GDP growth in Q3 as well as the revised figure for Q2 has happened because of double-digit growth in the manufacturing sector.
The government is trying to lift the capital investment cycle in the economy by pushing up its own investments. The government’s capital expenditure rose to ₹7.21 trillion during April-January FY24, or 75.9% of the revised annual estimate, from ₹5.70 trillion in the same period in FY23.
The quarter saw 7.8% growth in fixed investments and government consumption expenditure, while household consumption maintained a good pace of 58.6%, which is marginally lower than the higher base of 61.3% in the same quarter of FY23.
Mining grew 7.5% in Q3, up from 11.1% in the previous quarter and manufacturing expanded 11.6%, as against 14.4% in the prior quarter. Electricity and other public utilities expanded by 9% versus 10.5%.