India's economy is estimated to have expanded by 8.2% in 2023-24. This notable growth is fueled by substantial increases in the manufacturing and construction sectors, along with a strong performance in the Jan-March quarter. This exceeds expectations and establishes a solid foundation for the new government, which takes office this month following the elections.
India’s economy has demonstrated remarkable resilience, achieving an impressive 8.2% growth in the fiscal year 2023-24. This robust expansion has been driven by a significant boost in the manufacturing and construction sectors, alongside a strong performance in the Jan-March quarter, laying a solid foundation for the new government.
Impressive Quarterly Growth
According to data released by the National Statistical Office (NSO) on Friday, the economy grew by 7.8% in the Jan-Mar quarter. Although this is slightly slower than the revised 8.6% growth in the Oct-Dec period, it is notably higher than the 6.2% growth recorded in the same quarter of the previous fiscal year. This strong quarterly performance contributed to the overall annual growth rate, surpassing the second advance estimate of 7.6% and the Reserve Bank of India’s 7% projection.
Prime Minister Narendra Modi expressed his optimism on X, stating, “The Q4 GDP growth data for 2023-24 shows robust momentum in our economy which is poised to further accelerate,” and referred to the growth as “a trailer of things to come.”
Economic Resilience Amid Global Challenges
Finance Minister Nirmala Sitharaman also highlighted the economy's resilience, saying, “India’s growth momentum will continue in the third term of Modi-led govt.” She pointed out that various high-frequency indicators show that the Indian economy remains buoyant despite global challenges.
The recent upgrade of India’s sovereign rating outlook to positive by global ratings agency S&P underscores the strength of the country's growth and the improving quality of government spending.
Sectoral Performance
The data revealed a significant rebound in the manufacturing sector, which grew by 9.9% in FY 2023-24, compared to a contraction of 2.2% in the previous fiscal year. The construction sector also saw a robust growth of 9.9%, slightly up from 9.4% in the previous year. Overall, the industry sector grew by 9.5%, a marked increase from the 2.1% growth in the previous fiscal year. While the services sector, which constitutes over 55% of the economy, grew by 7.6%, this was a slight deceleration from the previous year’s 10% growth.
Challenges and Future Outlook
Despite these positive developments, the farm sector's growth slowed to 1.4% in 2023-24 from 4.7% in the previous year. Private and government consumption also remained soft throughout the year. However, experts remain optimistic about the future.
Rajani Sinha, Chief Economist at Care Edge, noted, “On the expenditure side, as expected, the growth has been mainly led by govt's strong capex. A strong uptick in overall export growth, along with moderation in import growth, also supported the growth momentum in the fourth quarter. However, the concerning aspect is that the private consumption growth has remained feeble.” She expects GDP growth to be around 7% for FY25, driven by improved rural consumption and a normal monsoon.
Addressing Risks and Challenges
Government sources have acknowledged several risks, including geopolitical tensions and monetary policy uncertainties. They also highlighted the potential impact of frequent and overlapping adverse climate shocks on food prices. However, they remain confident, noting that the combined efforts of the government and the RBI have kept inflation in check.
India’s economic performance in 2023-24 showcases its resilience and potential for continued growth. With a robust foundation laid by strong sectoral performances and strategic government initiatives, the country is well-positioned to maintain its status as the fastest-growing major economy. The positive outlook from global rating agencies further reinforces confidence in India’s economic trajectory.
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