India's economic engine delivered a powerful performance in the final quarter of 2023, with official data revealing a surprisingly strong growth rate that has prompted an upward revision of the full-year forecast. The latest figures from the National Statistical Office (NSO) have provided a significant boost to the economic narrative for the fiscal year 2023-24.
Robust Quarterly Performance Exceeds Expectations
The Gross Domestic Product (GDP) for the October-December quarter of the 2023-24 fiscal year expanded by a remarkable 8.4 percent. This growth rate is substantially higher than the 4.3 percent recorded in the same quarter of the previous fiscal year and also surpasses the revised 8.1 percent growth seen in the preceding July-September quarter. The stellar third-quarter performance has been a key driver behind the revised annual outlook.
The data, released on February 29, 2024, indicates broad-based strength. A critical component, the Gross Value Added (GVA), which measures the value of goods and services produced in the economy, also showed healthy growth. The GVA growth for Q3 FY24 stood at 6.5 percent, a solid increase from the 4.8 percent registered in Q3 of the last fiscal year.
Full-Year Estimate Revised Upwards
Buoyed by the stronger-than-anticipated performance in the third quarter, the National Statistical Office has revised its projection for the entire fiscal year 2023-24. The first advance estimate of GDP growth, released in January, had pegged the expansion at 7.3 percent. The latest second advance estimate has now raised this figure to a more optimistic 7.6 percent.
This upward revision signals growing confidence in the economy's resilience. Similarly, the full-year GVA growth estimate has been adjusted from the earlier 6.9 percent to 6.9 percent (implicitly reflecting the Q3 data's impact on the calculation), with the focus remaining on the upgraded GDP number. The estimates are calculated using benchmark data from the previous year, 2021-22.
Sectoral Performance and Economic Implications
The breakdown of the GVA data reveals which sectors contributed to this growth. The manufacturing sector witnessed a notable turnaround, registering a growth of 11.6 percent in Q3 FY24, a dramatic recovery from the contraction of 4.8 percent in the same period last year. This suggests a revival in industrial activity and demand.
Other key sectors also posted positive numbers:
- Construction continued its strong run with a growth of 9.5 percent.
- Mining and quarrying activity expanded by 7.5 percent.
- The services sector, a major employment generator, showed mixed trends with trade, hotels, and transport growing at 6.7 percent.
However, the agriculture sector presented a point of concern. The GVA for agriculture, forestry, and fishing contracted by 0.8 percent in the third quarter, highlighting the vulnerabilities in the farm economy which may be affected by monsoon variability and base effects.
The release of this data is a crucial input for the government's economic policy planning and the Reserve Bank of India's monetary policy committee deliberations. The strong growth figures, particularly in manufacturing, provide positive momentum as India heads into a new fiscal year and the final phase of the current financial year 2023-24. Analysts will be watching closely to see if this momentum can be sustained amidst global economic headwinds.
