Economists say that with initial estimates of 7.3% for this financial year, the second half of the year will see slightly slower numbers.
Economists welcomed India’s real GDP growth in 2023-24, estimated at 7.3%, up from 7.2% a year ago, according to the first preliminary estimate of national income released by the National Statistics Office (NSO), means the Indian economy is set to show strong growth. However, it said with the first advance estimate of 7.3% for this financial year, the second half of the year will see slightly slower numbers. For FY25, Rajani Sinha, Chief Economist, CareEdge Ratings, said, “We expect real GDP growth to be between 6.5% and 7%. The main controllable factor will be a broader recovery in consumer demand, which will depend on a further recovery in the informal sector and rural demand. The other important aspect will be a significant recovery in private investment in the coming quarters.”
NSO’s outlook is in line with the Reserve Bank of India’s (RBI) growth forecast revision, raising it to 7% from the previous estimate of 6.5%. According to economists, growth was driven by the manufacturing and construction sectors, while growth in the services sector was somewhat moderate. “While agriculture growth slowed significantly to 1.8% from 4.0% last fiscal, non-farm drivers more than offset its impact. In this context, industry, especially construction, has become an important driver, while services have seen regulation. On the demand side, investments have created a wall. Private consumption growth was at 4.4 per cent, lower than overall GDP growth, said Dharmakirti Joshi, chief economist at CRISIL Ltd.
Aditi Nayar, Chief Economist, Head of Research and Outreach, ICRA Ltd
The preliminary estimate released by NSO pegs GDP growth in FY24 at 7.3%, much higher than our estimate of 6.5%. Implicitly, NSO expects GDP growth to moderate at 7.0% in the second half of FY24, from 7.7% in the first half of FY24. Surprising is the GVA growth Estimated at 6.9% for FY2024 implies that growth in the index is expected to be 6.2% in the second half of the year, significantly lower than the estimated GDP figure for the period.
In our view, the expected growth in H2FY24 is quite strong, given the gloomy agriculture sector outlook amid low kharif output and continued delay in rabi sowing , as well as concerns about a temporary slowdown in investment in the near future. Elections. In fact, Indian government investment fell 8.8% year-on-year in October-November 2023, after growing 43.1% in the first half of FY24.
As a result, we believe that agriculture and construction GVA growth in the second half of FY24 is likely to be lower than the ONS estimate. Furthermore, we also believe that the estimated growth of the services sector in the second half of FY24 will be higher.
NSO pegs nominal GDP growth at 8.9% for FY24, significantly lower than the 16.1% seen in FY23, with the deceleration largely due to WPI reversal towards deflation compared to inflation in the previous year. Based on nominal GDP for FY24 estimated by NSO, the absolute fiscal deficit in the Government of India’s budget is Rs 17.9 trillion or 6.0% of GDP, slightly higher than BE for FY24 is 5.9% of GDP. Rajani Sinha, Chief Economist, CareEdge Ratings
India’s GDP growth in FY24 according to FAE at 7.3% was a positive surprise. Outstanding growth was driven by the manufacturing and construction sectors, while growth in the services sector was moderate. The sharp deceleration in the commercial, hospitality, transport and communication segments is not too worrying as it is explained by last year’s high base and decline in discretionary demand. Growth was weaker in the agriculture sector, at 1.8%, in line with expectations due to a poor monsoon.
The worrying aspect of the GDP data is weak consumption growth, at 4.4%. This would be the slowest consumption growth in the last two decades, if the pandemic year 21 were not included. Investment increased by 10.3% thanks to significant investments from the Center and state governments. However, to maintain investment growth, it is important that consumption growth is maintained. While global growth remains weak, India’s export growth is weak at 1.4% in FY24. Estimated nominal GDP growth of 8.9% raises some concerns about its potential impact on fiscal deficit target in FY24.
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