Surpassing even the most optimistic projections, the Indian economy grew at a robust 8.2 per cent in the just concluded financial year (2023-24), as per the provisional estimates released by the National Statistical Office. This is higher than the RBI’s earlier projection of 7 per cent, the NSO’s own estimate, which had pegged growth at 7.6 per cent, and assessments by most private forecasters. The full year growth estimate has been pushed up by the fourth quarter numbers, where the economy is now estimated to have grown at 7.8 per cent, as opposed to the implicit growth of 5.9 per cent in the NSO’s earlier estimate.
The disaggregated data shows that agriculture continues to fare poorly. After growing at 0.4 per cent in the third quarter, the sector grew at a mere 0.6 per cent in the fourth quarter, indicating the continuing impact of last year’s unfavourable monsoon. Manufacturing, however, fared better, even though it has fallen from the highs observed in the second and third quarters. Construction activity remains healthy — this can also be seen in proxies for the sector, such as cement production and steel consumption, which grew last year at 9.1 per cent and 13.6 per cent respectively. However, trade, hotels, transport and communication — segments that employ a large section of the informal workforce — have slowed down. There are some aspects of this data that warrant a more careful analysis. Value added by the entire economy has fallen from 8.3 per cent in the first quarter to 6.3 per cent in the fourth quarter. The divergence between the GDP and the GVA (gross value added) estimates, especially in the second half of the year, point to the impact of net taxes on products (higher tax collections and/or lower subsidy outgo). Net taxes, in fact, grew at 31.2 per cent in the third quarter and 22.2 per cent in the fourth quarter. Further, while real GDP growth has risen from 7 per cent in 2022-23 to 8.2 per cent in 2023-24, in nominal terms, it has fallen from 14.2 per cent to 9.6 per cent over this period. This would suggest that the deflator has played a role. There is also the divergence in consumption and investment — private spending continues to remain weak, growing at a mere 4 per cent last year, while investment activity remains healthy, growing at almost 9 per cent.
Leading economic indicators suggest that the momentum in growth has continued in the current financial year as well. A recent study by economists at the RBI has pegged growth at 7.5 per cent in the first quarter. This is higher than the central bank’s earlier estimate of 7 per cent. How the economy fares, whether rural demand improves, if private consumption and investment pick up, will be shaped by the monsoon, the proposals in the Union budget that will be tabled by the next government, and the stance of fiscal and monetary policy.
