India's economy delivered a powerful performance in the final quarter of 2023, clocking a surprisingly robust growth rate that has prompted the government to upgrade its full-year forecast. The latest data signals strong momentum for Asia's third-largest economy.
Stellar Q3 Performance and Revised Estimates
According to data released by the National Statistical Office (NSO), India's Gross Domestic Product (GDP) expanded by 8.4% in the October-December quarter (Q3) of the 2023-24 financial year. This marks the fastest growth rate in six quarters and significantly surpasses most analyst projections.
Buoyed by this strong showing, the NSO also revised its estimates for the first two quarters of FY24 upwards. The growth for the April-June quarter (Q1) is now pegged at 8.2%, up from the earlier 7.8%, while the July-September quarter (Q2) estimate has been adjusted to 8.1% from 7.6%.
Consequently, the government has raised its full-year (2023-24) growth projection to 7.6%, a notable increase from the 7.3% estimate provided in its first advance estimates released in January.
Sectoral Drivers and GVA Analysis
While the headline GDP number is impressive, a look at the Gross Value Added (GVA), which measures the economic value of goods and services produced, presents a more nuanced picture. The GVA growth for Q3 FY24 stood at 6.5%, indicating that a portion of the GDP surge came from robust growth in net taxes.
Key sectors that contributed to the economic expansion include manufacturing, which saw a strong turnaround with a growth of 11.6% in GVA during the third quarter. The construction sector also remained a significant driver, growing at 9.5%.
However, the agricultural sector, which employs a large portion of the population, showed signs of strain. The GVA for agriculture, forestry, and fishing contracted by -0.8% in Q3, reflecting the challenges posed by erratic monsoon patterns and base effects.
Implications and the Road Ahead
The remarkable GDP figures for Q3 FY24 solidify India's position as one of the world's fastest-growing major economies. The upward revision of the full-year estimate to 7.6% provides a positive backdrop for the economy as it heads into the new financial year.
This robust growth trajectory is likely to influence policy decisions, including those of the Reserve Bank of India (RBI), which has maintained a focus on controlling inflation. The strong data may provide the central bank with more room to navigate its monetary policy stance.
Economists point out that while the numbers are encouraging, sustaining this high growth will require addressing sectoral imbalances, particularly in agriculture, and ensuring that private investment continues to pick up pace to complement government capital expenditure.
The final GDP data for the full 2023-24 financial year will be released on May 31, 2024, providing a complete picture of India's economic performance.
