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The Narendra Modi government’s 10th year ended with an impressive 8.2 per cent economic growth rate in 2023-24 (FY24), aided by a greater-than-expected expansion of 7.8 per cent in the fourth quarter, according to the provisional estimates of gross domestic product (GDP) growth released by the National Statistical Office (NSO) on Friday.
This marks the ninth time since 1961-62 that GDP growth has crossed the 8 per cent threshold.
In the 10 years of the Modi government, the economy expanded at an average rate of 6 per cent, compared to the average 6.82 per cent growth seen under the Congress-led government of Manmohan Singh. A 5.8 per cent contraction in GDP in FY21, due to the Coronavirus pandemic, weighed against this government’s economic record.
Lauding the high GDP growth in FY24, Prime Minister Modi on Friday said it underlines robust momentum in the economy which is poised to accelerate further. “As I've said, this is just a trailer of things to come,” he posted on X.
Union Finance Minister Nirmala Sitharaman termed the GDP growth rate as “remarkable”, noting that India outpaced all other major economies worldwide. She expressed confidence that the country’s growth momentum would continue into Modi’s third term as Prime Minister.
“The manufacturing sector witnessed a significant growth of 9.9 per cent in 2023-24, highlighting the success of the Modi government’s efforts for the sector. Many high-frequency indicators suggest that the Indian economy remains resilient and buoyant despite global challenges,” she further said.
In a post on X, Chairman of the 16th Finance Commission Arvind Panagariya dubbed the economic growth figure for FY24 “great news for India”.
The median forecast from a survey of 54 economists by Reutersput GDP growth at 6.7 per cent for the fourth quarter of FY24. The higher-than-expected growth in the March quarter was largely attributable to increased net tax collections, as the gap between GDP and gross value added (6.3 per cent) growth remained wide.
Rajani Sinha, chief economist at Care Ratings, noted that the fourth quarter GVA growth was broadly in line with expectations. However, upward revisions in GVA from previous quarters boosted overall growth for FY24. “Moreover, the divergence in GDP and GVA growth seen in Q3 has continued, with net taxes growing by 22 per cent in Q4. This has propelled the GDP growth for Q4,” Sinha said.
The provisional GDP estimates showed that the size of the Indian economy, at approximately Rs 295.4 trillion in FY24, grew by 9.6 per cent in nominal terms, compared to the 14.2 per cent growth registered in the preceding year. The 8.2 per cent growth in FY24 surpassed the Central Statistics Office’s earlier estimate of 7.6 per cent. Provisional estimates, which provide a more accurate picture with updated data, have a longer shelf life, as the next estimate for FY24 from the NSO will only be released in 2025.
“Although real GDP is still around 7.5 per cent below where it would have been without the pandemic, domestic strengths and policy focus have put the economy on a healthy growth trajectory and are trimming the permanent loss of GDP from the pandemic,” said D K Joshi, Chief Economist at Crisil.
Joshi anticipates that growth will moderate to 6.8 per cent in FY25, with higher interest rates and lower fiscal impulse tempering demand in non-farm sectors. “Agriculture, however, is expected to improve its performance in the current financial year on the back of a normal monsoon and a favourable base effect,” he added.
Agriculture grew at 0.6 per cent in the fourth quarter of FY and 1.4 per cent in the entire year, due to uneven rainfall patterns, which were adversely impacted by the El Niño weather phenomenon.
The moderation in growth during the fourth quarter was also observed across industry and services. While manufacturing (8.9 per cent) and construction (8.7 per cent) slowed down during the March quarter, experts have expressed concern over the deceleration in the services sector to 6.7 per cent from 7.1 per cent in the preceding quarter.
On the demand side, private spending, represented by private final consumption expenditure, continued to grow at a low but steady pace of 4 per cent in the March quarter. Government spending, represented by government final consumption expenditure, recovered to positive territory, growing at 0.89 per cent during Q4, up from a contraction of 3.2 per cent in the preceding quarter. Gross fixed capital formation, which represents investment demand in the economy, moderated in the fourth quarter but remained robust, growing at 6.5 per cent.
