India’s GDP growth seen at 7.3% amid global slowdown

NEW DELHI: India’s economy is estimated to grow by 7.3% in the current fiscal year ending March, powered by robust manufacturing, construction and mining sector expansion – a stellar performance against the backdrop of a slowing global economy and geopolitical upheaval.

The first advance estimates released by National Statistical Office on Friday showed the economy is projected to perform better than RBI’s projection of 7% for 2023-24 and higher than the earlier estimates of 6.5% growth.

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The strong second-quarter performance of 7.6% had prompted several agencies to upgrade India’s growth projections citing robust domestic demand. India continues to remain the fastest-growing major economy in the world as China’s growth slows led by a raft of problems, including real estate sector woes. The strong data comes ahead of the February 1 interim budget and before LS elections due in May and is likely to bolster government’s record of handling the economy against the backdrop of global turbulence.
There’s no let-up in growth momentum: Finance minister
NSO said these are early projections for 2023-24. Improved data coverage, actual tax collections and expenditure incurred on subsidies, data revisions made by source agencies would have a bearing on subsequent revisions of these estimates.
It also said the first revised estimates for 2022-23 (benchmark years), due for release on February 29, may also lead to revision in growth rates reflected in the first advance estimate. “Estimates are, therefore, likely to undergo revisions for the aforesaid causes in due course, as per the release calendar. Users should take this into consideration while interpreting the figures,” said the statistics office while urging caution in interpreting the numbers.
Growth in 2023-24 is estimated to be led by a strong manufacturing sector growing by 6.5%, higher than the 1.3% record in the previous year, while the construction sector is projected to grow 10.7% on top of a growth of 10% in 2022-23.
The data also showed some worrying trends. The farm sector is projected to grow by 1.8% in 2023-24, lower than the 4% recorded in the previous – a fallout of the patchy monsoon rains. The crucial services sector is forecast to slow and grow by 7.7% in 2023-24, lower than the 9.5% recorded in the previous year.

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Finance ministry said: “The advance estimates show no let-up in growth momentum in the economy. Resilience and strength of the economy underpinned by reforms of the last nine years have laid the foundations for the economy to sustain a healthy growth rate in the coming years.”
Economists expect second half growth to slow in 2023-24 after a strong 7.7% expansion in the first half. Global headwinds such as geopolitical uncertainty, trajectory of inflation and interest rates, and slowing global demand are expected to be key obstacles to faster expansion.
“The concerning aspect in the GDP data is weak consumption growth at 4.4%. This would be the slowest consumption growth in the past two decades barring the pandemic year of FY21. Investment has grown by a strong 10.3% led by strong capex by Centre and state governments. However, for the investment growth to be sustained, it is very important for consumption growth to be bolstered. With global growth remaining weak, India’s export growth has been weak at 1.4% in FY24. The estimated nominal GDP growth of 8.9% raises some apprehensions regarding its potential impact on the fiscal deficit target for FY24,” said Rajani Sinha, chief economist at ratings agency CareEdge.

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