1. NSO has unveiled the first advanced estimates, predicting a robust growth rate of 7.3% for India’s economy in the fiscal year 2023-24.
2. This projection exceeds earlier forecasts made by notable institutions, including the IMF, the RBI, and several research firms.
3. The higher-than-expected growth positions India as a standout performer among major economies, showcasing economic resilience and potential for sustained positive momentum.
New Delhi, Jan 06: The National Statistical Office (NSO) released the first advanced estimates, projecting India’s economy to grow at an impressive rate of 7.3% in the fiscal year 2023-24.
This surpasses earlier forecasts by institutions like the International Monetary Fund (IMF), the Reserve Bank of India (RBI), and various research firms. The robust growth is attributed to substantial government investment and spending, positioning India as the world’s fastest-growing major economy.
However, concerns linger regarding sluggish private consumption and tepid nominal GDP growth, which may impact tax collections and the fiscal deficit.
Exceeding Projections: The 7.3% GDP growth forecast for 2023-24 surpasses the IMF’s October estimate of 6.3% and projections by the RBI and other research entities. This higher-than-expected growth places India at the forefront of major economies globally. The positive economic data is expected to bolster the government’s economic narrative, especially ahead of the interim budget and the upcoming 2024 general elections.
Driving Forces of Growth:
- Government Investment and Spending: The growth is primarily fueled by substantial government investment and spending. Government Final Consumption Expenditure (GFCE) growth has increased from 0.1% in 2022-23 to 4.1% in 2023-24.
- Investment Momentum: Gross Fixed Capital Formation (GFCF), measuring investment spending, has sustained double-digit growth for the third consecutive year, driven largely by government infrastructure spending.
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Concerns Around Consumption: Despite the robust growth, concerns arise from the relatively low Private Final Consumption Expenditure (PFCE) growth, standing at 4.4%. PFCE, accounting for 58% of total GDP, exhibits the lowest growth since 2002-03, reflecting potential challenges in mass consumption and highlighting a K-shaped recovery in the economy.
Sector-Wise Breakdown:
- Manufacturing Surge: The manufacturing sector has witnessed a substantial increase, jumping from 1.3% growth in 2022-23 to 6.5% in 2023-24.
- Agriculture and Trade Impact: Critical sectors like Agriculture and Trade, Hotels, Transport, Communication and services related to Broadcasting have experienced a decline in economic momentum, raising concerns about the overall economic trajectory.
Tepid Nominal GDP Growth: While the GDP growth is robust, nominal GDP growth at 8.9% is 1.6 percentage points lower than the 10.5% assumed in the 2023-24 Union Budget. The shortfall in nominal GDP may impact tax collections, potentially leading to a higher fiscal deficit than anticipated.
Looking Ahead: Economists highlight the need to monitor whether the lower-than-expected nominal GDP is a deflation-related issue or could impact tax collections. The Revised Estimate numbers in the Interim Budget on February 1 will provide more clarity on the economic outlook for the rest of the fiscal year.
Government’s Response: The Union finance ministry expresses confidence in the economy’s resilience and strength, attributing the growth to reforms implemented over the past nine years. The government sees the data as a testament to the foundations laid for sustaining a healthy growth rate in the coming years.
