India’s economy has surpassed expectations with a remarkable growth rate of 8.4 percent in Q3FY24, defying earlier projections. This surge is attributed to exceptionally high tax collections and effective control over subsidies. Earlier estimates by Bloomberg economists and the Reserve Bank of India had anticipated a slower growth rate of around 6.6 to 6.5 percent for the December quarter. The National Statistical Office (NSO) revised its FY24 growth estimate upwards to 7.6 percent, citing improved control over subsidies and an adjustment in the FY23 growth estimate from 7.2 to 7 percent. Despite this, the NSO’s projection for Q4FY24 growth stands at 5.9 percent, with the nominal GDP for FY24 projected at Rs 294 trillion, assuming a growth rate of 9.1 percent.
The growth in gross value added (GVA) at basic prices remained within analysts’ expectations at 6.5 percent. However, the surge in net indirect taxes to a six-quarter high of 32 percent in the December quarter contributed significantly to the gap between real GDP and GVA growth estimates. Aditi Nayar, chief economist at ICRA Ratings, emphasized the importance of monitoring GVA growth trends to understand the underlying economic momentum.
In the December quarter, manufacturing continued its double-digit growth, while services and public administration also showed significant growth. However, farm output contracted by 0.8 percent due to adverse weather conditions. Sunil Kumar Sinha, principal economist at India Ratings, highlighted the disconnect between input costs and corporate profitability, which contributed to the disparity between GVA and GDP growth.
Private consumption expenditure remained weak, growing at only 3.5 percent, while government spending contracted by -3.2 percent as part of revenue expenditure restraint efforts. Nonetheless, gross fixed capital formation saw robust double-digit growth, indicating continued government capital expenditure. Rajani Sinha, chief economist at Care Ratings, stressed the importance of broad-based improvements in consumption and private investment for sustainable GDP growth.
Despite global challenges, exports recorded modest growth, driven primarily by services exports. While merchandise exports picked up after subdued growth in previous quarters, services exports continued to grow steadily. These developments underscore India’s resilience amidst global economic uncertainties.
