Govt's FY24 GDP Projection Surprises At 7.3% Upswing

India's Ministry of Statistics and Programme Implementation projects a 7.3 per cent GDP growth for 2023-24, an increase from the previous fiscal year's 7.2 per cent, according to its initial assessment released on 5 January.

This estimation surpasses the Reserve Bank of India's recent revision to 7 per cent. The Finance Ministry, although not specifying an updated numerical forecast after the striking 7.6 per cent growth in July-September 2023, anticipates GDP growth to exceed its initial projection of 6.5 per cent.

This inaugural GDP estimate arrives ahead of the 1 February presentation of the interim Budget for 2024-25. The Finance Ministry will rely on this projection to craft various Budget aspects for the upcoming year, including fiscal deficit targets and tax collection growth.

The Finance Ministry's initial assumption for 2023-24's nominal GDP growth was 10.5 per cent. However, the statistics ministry's early projection suggests a potential 8.9 per cent growth for India's GDP in nominal terms this fiscal year.

The surge in the manufacturing sector, expected to grow by 6.5 per cent compared to 1.3 per cent in 2022-23, and a striking 10.7 per cent growth in the construction sector, on top of a 10 per cent expansion in the previous year, are poised to drive this year's elevated growth. Other sectors like mining, financial services, real estate, professional services and public administration are also anticipated to contribute higher gross value added (GVA) growth rates.

However, agricultural growth is predicted to decelerate notably to an eight-year low of 1.8 per cent due to erratic monsoons affecting farm output.

Overall, the GVA growth for 2023-24 is estimated at 6.9 per cent, marginally lower than the previous year's 7.0 per cent. GDP is calculated as the sum of GVA and indirect taxes, minus subsidies.

On the spending side, private consumption growth is anticipated to sharply decline to 4.4 per cent from 7.5 per cent in the prior year, while gross fixed capital formation, indicative of investments, is expected to sustain robust growth at 10.3 per cent compared to 11.4 per cent in 2022-23.

While the preliminary GDP figure signals optimism for the Indian economy, subsequent revisions are likely. The statistics ministry is set to release GDP data for October-December 2023 on 29 February, followed by further estimates leading to the final release of data for January-March 2024 by the end of May, accompanied by three revised estimates.