India GDP: Advance Estimates Peg FY24 Growth At 7.3%, Nominal GDP Expansion At 8.9%

The Indian economy will show strong growth in the current fiscal amid resilient economic activity.

The gross domestic product is estimated to grow 7.3% in FY24, according to the first advance estimates released by the Central Statistics Office ahead of the Union budget. This is compared to a provisional estimate of 7.2% for FY23.

A Bloomberg poll of economists estimated the country's GDP to rise 6.7% in FY24. GDP growth for fiscal 2024 is projected at 7% by the Reserve Bank of India.

Gross value added, which strips out indirect tax and subsidies, is expected to rise 6.9%, as compared with a growth of 7% in the previous fiscal.

Nominal GDP, which will be used as the base for the upcoming budget, is estimated to rise by 8.9%, as against a gain of 16.1% in FY23.

The growth assumed for H2 FY24 is quite high, given the tepid outlook for agriculture amid the weak Kharif output and ongoing lag in Rabi sowing, as well as the feared temporary slowdown in capex ahead of the general elections, according to Aditi Nayar, chief economist at ICRA.

In fact, the government's capex declined by 8.8% on an annual basis during October-November 2023 after rising by 43.1% in H1 FY24, she said.

Consequently, the agriculture and construction GVA growth for H2 FY24 is likely to print lower than that estimated by the NSO, Nayar said. Besides, the growth estimated for the services sector for H2 is on the higher side, she said.

The NSO has pegged the nominal GDP growth at 8.9% in FY24, with the deceleration from last year, largely on account of the turnaround in the WPI print to deflation from inflation in the previous year, said Nayar.

Based on the nominal GDP for FY24 estimated by the NSO, the government's absolute budgeted fiscal deficit of Rs 17.9 lakh crore works out to 6% of GDP, a tad higher than the FY24 BE of 5.9% of GDP, she said.

GDP Estimates: Key Sectoral Trends

• Agriculture sector is estimated to grow by 1.8% in FY24, as compared with 4% in FY23.

• The mining sector is likely to grow by 8.1% in FY24, as compared with 4.6% in the previous fiscal.

• Manufacturing sector growth is estimated at 6.5%, after growing by 1.3% in the previous fiscal.

• Electricity, gas, water supply and other utility services are estimated to grow 8.3% as against a growth of 9% in FY23.

• Construction is set to rise 10.7%, as compared with a growth of 10% in the preceding fiscal.

• Trade, hotel, transport, and communication is estimated to rise by 6.3% in comparison with a growth of 14% last fiscal.

• The financial services, real estate and professional services sector is likely to grow by 8.9%, as compared with a growth of 7.1% in the previous financial year.

• The public administration segment, supported by government spending, is seen at 7.7%, as compared with a growth of 7.2% in FY22.

Expenditure Trends

• Private final consumption expenditure, reflecting consumer spending, is seen rising by 4.4% in FY24.

• Growth in government final consumption expenditure is pegged at 4.1%.

• Gross fixed capital formation, which reflects private investment, is estimated to rise by 10.3%.

The concerning aspect in the GDP data is the weak consumption growth, said Gaura Sen Gupta, India economist at IDFC First Bank Ltd. This would be the slowest consumption growth in the past two decades, barring the pandemic year of FY21, she said.