India’s real GDP growth in 2023-24 is estimated at 7.3%, compared to 7.2% a year ago, as per the first advance estimates of national income released by the National Statistical Office (NSO) on Friday, which reckon the economy will outperform the 7% uptick recently projected by the Reserve Bank of India (RBI).
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With GDP growth in the first half of this year clocking 7.7%, the NSO’s advance estimates, that rely on data for the first six-eight months of a year and are helpful in the Union Budget formulation, indicate the second half will grow about 6.9%-7%.
Interestingly, the NSO expects the growth in Gross Value Added (GVA) in the economy to ease slightly from 7% in 2022-23 to 6.9% this year, and pegs nominal GDP growth at 8.9% compared to the 10.5% Budget estimate. This could translate into the fiscal deficit breaching the year’s 5.9% of GDP target to hit around 6%, economists cautioned.
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GVA growth for the farm sector is estimated to more than halve from 4% a year ago to 1.8% this year, as is the case for Trade, Hotels, Transport, Communication and Services whose GVA uptick is estimated to moderate to 6.3% from 14% in 2022-23. Some economists reckoned even these appeared to be optimistic estimates, while consumption spends have emerged as a worry.
“The concerning aspect in the GDP data is the weak consumption growth at 4.4%. This would be the slowest consumption growth in the past two decades barring the pandemic year of 2020-21,” said Rajani Sinha, chief economist at CareEdge Ratings.
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The NSO said the share of private final consumption expenditure in GDP is expected to drop this year to the lowest in at least three years at 56.9% from 58.5% in 2022-23. While the investment rate is likely to pick up to nearly 30% of GDP, driven by government capex, higher consumption growth is vital for private investments to take on the onus of spurring the economy.
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Manufacturing GVA growth is estimated to accelerate to 6.5% in 2023-24 from just 1.3% a year earlier, while mining GVA is expected to rise 8.1%, from 4.6% in 2022-23. Construction GVA growth is reckoned to remain solid at 10.7% this year, on top of the 10% uptick recorded in 2022-23.
“Real GDP or GDP at Constant (2011-12) Prices in the year 2023-24 is estimated to attain a level of ₹171.79 lakh crore, as against the Provisional Estimate of GDP for the year 2022-23 of ₹160.06 lakh crore, released on 31st May, 2023,” the NSO said.
The RBI has pegged third quarter real GDP growth in this financial year at 6.5%, which may moderate further to 6% in the January to March 2024 quarter.
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The NSO stressed that these are early projections for 2023-24 and improved data coverage, actual tax collections and expenditure incurred on subsidies, data revisions made by source agencies, etc. would have a bearing on subsequent revisions of these estimates. “Users should take this into consideration while interpreting the figures,” it underlined.
The First Revised Estimates for 2022-23 are due for release on February 29 and may also lead to a revision in growth rates reflected in the advance estimates released on Friday.
“The growth assumed for the second high is quite high, given the tepid outlook for agriculture amidst the weak kharif output and ongoing lag in rabi sowing, as well as the feared temporary slowdown in capex ahead of the General Elections,” said ICRA chief economist Aditi Nayar.
“Consequently, we believe that the agriculture and construction GVA growth for the second half is likely to print lower than the NSO estimates. Besides, we also believe that the growth estimated for the services sector for H2 FY2024 is on the higher side,” she added.
“This growth estimate is much higher than what has been projected by the RBI and our estimate of 6.6%-6.7%,” said Madan Sabnavis, Bank of Baroda’s chief economist. The weak agriculture GVA growth was expected as the Kharif crop is projected to drop and Rabi sowing has been slow, he averred.