This is the highest annual growth since FY17, excluding the 9.7% post-Covid rebound in gross domestic product (GDP) in FY22 after the 5.8% contraction in FY21. The advance estimate released in February had pegged FY24 growth at 7.6%. Economists and government expect the high growth to continue though tepid private consumption remains a concern.
The data comes ahead of the final phase of polling on Saturday.
“Many high-frequency indicators indicate that the Indian economy continues to remain resilient and buoyant despite global challenges,” finance minister Nirmala Sitharaman posted on X.
Early Rate Cut Unlikely
Investment as a ratio of nominal GDP rose to a decadal high of 30.8% in FY24.
Sequentially, the fourth quarter was the slowest in the year, slipping from 8.6% in the December quarter, but came in well ahead of the 6.8% median forecast in an ET poll.
GDP growth was 8.2% in the June quarter and 8.1% in the July-September period.
Gross value-added (GVA) growth was 7.2% in FY24, a full percentage point below GDP, suggesting that net taxes contributed heavily to the acceleration.
“India’s growth continues to surprise on the upside,” said Crisil chief economist DK Joshi, adding that “domestic strengths and policy focus have put the economy on a healthy growth trajectory and is trimming the permanent loss of GDP from the pandemic.”
Nominal growth was up 9.6% compared with 14.2% in the previous year, as deflation in the wholesale price index kept the GDP deflator muted for the year.
The stellar GDP number comes a day after S&P Global Ratings upgraded India’s outlook for the first time in nearly a decade, suggesting a rating upgrade within the next 24 months if economic momentum persists and the country stays on the path of fiscal consolidation.
The strong growth dents hopes of any quick cut in interest rates by the central bank.
“Today’s print suggests growth is moving faster than expected by the RBI (Reserve Bank of India), which means the central bank should see little urgency to cut rates while the MPC (monetary policy committee) waits for comfort on headline inflation,” Shreya Sodhani of Barclays said in a note.
Factory Rebound
Manufacturing expanded 8.9% in the fourth quarter while the full FY24 growth was 9.9%, topping the sectors along with construction, which also posted a 9.9% rise in the full year.
“It is worthwhile to note that the manufacturing sector witnessed a significant growth of 9.9% in 2023-24, highlighting the success of the Modi government’s efforts for the sector,” Sitharaman said.
“Pleasing part of growth this year is manufacturing growth at ~10%,” International Monetary Fund executive director KV Subramanian said on X. “So, India can indeed grow its manufacturing by addressing policy failures.”
Agriculture grew a tepid 0.6% in the last quarter while the full-year growth was 1.4%.
“The lingering impact of the unfavourable 2023 monsoon was seen in the performance of the agri sector, which just eked out a 0.6% YoY rise in Q4 FY24,” said Aditi Nayar, chief economist, ICRA.
Private consumption expanded by 4% in the fourth quarter, similar to last quarter’s growth, whereas exports were 8.1% higher following 3.4% expansion in Q3.
“The concerning aspect is that the private consumption growth has remained feeble,” said CareEdge chief economist Rajani Sinha.
Growth Outlook
Economists note that a higher growth momentum is likely to continue in the coming year as well. The IMF expects 6.8% growth in FY25 while the Reserve Bank of India has a higher 7% estimate for the current fiscal.
“We assess FY25 real GDP growth to be 7-7.5%, expecting continued high capital expenditure growth in the forthcoming full year FY25 budget,” said DK Srivastava, chief policy advisor, EY India. “There is reasonable fiscal space available to the government despite the recent elections.”
With an above-normal monsoon forecast by the India Meteorological Department (IMD), growth is likely to get a boost from higher farm output, economists said. A recovery in private investment can also support growth but consumption remains a drag.
“Moderation in food inflation would also be critical for a broad-based improvement in consumption trend,” said Sinha of CareEdge.
Pronab Sen, former chief statistician, said that subdued consumption would be a challenge for growth momentum.
“The difference between consumption and gross value added is 3.2%, which is not sustainable in the long run,” Sen said.
Sabnavis said the high base could subdue growth in the current year, however, pegging FY25 growth at 7.3-7.4%.
Content Source: economictimes.indiatimes.com