Multiple data rejigs lift GDP growth to 7.6%, with 8.4% spurt in Q3

As farm sector GVA slips into a contraction in Q3, Chief Economic Advisor predicts a recovery next year; solid growth in construction, manufacturing, and mining; concerns remain about lagging private consumption

February 29, 2024 06:17 pm | Updated 11:43 pm IST - New Delhi

Making a flurry of revisions in the economy’s growth estimates, the National Statistical Office (NSO) on Thursday raised India’s real GDP growth esimate for this year to 7.6% from the 7.3% projected last month. It also scaled down its 7.2% growth estimate for 2022-23 to 7%, and raised its 2021-22 estimate from 9.1% to 9.7%.

The Gross Value Added (GVA) in the economy is projected to rise 6.9% this year, with the NSO downgrading last year’s GVA growth to 6.7% from 7%. GDP growth for the first two quarters of this year was raised to 8.2% and 8.1%, further rising to 8.4% for the the October to December 2023 quarter (Q3).

Economists expressed some surprise that GVA growth in Q3 slid to just 6.5% from revised estimates of 8.2% and 7.7% in Q1 and Q2, respectively. Concerns also persisted about private consumption, which grew 3.5% in Q3 from 2.4% in Q2, while the full year growth estimate was downgraded to 3% from the 4.4% reckoned in early January.

Struggling farm sector

Farm sector GVA growth slipped into a 0.8% contraction in Q3, and the full year is now expected to record a mere 0.7% rise, compared with 4.7% in 2022-23. Chief Economic Advisor V. Anantha Nageswaran said he expects the farm sector to recover next year, adding that industrial growth had lifted growth this year. Acceleration in GVA growth from three key sectors has helped: construction, up 10.7%; manufacturing, which is up 8.5% from a 2.2% dip in 2022-23; and mining, up 8.1% versus 1.9% last year.

Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, attributed this year’s growth upgrade to the downward revision to last year’s growth numbers, and the stronger investment and net exports, although consumption is lagging. “More intriguing is that the GVA estimates for this year have been left unchanged while GDP is sharply higher,” she said.

GVA growth in the employment-intensive trade, hotels, transport, communications, and broadcasting services sectors is expected to almost halve to 6.5% in 2023-24 from 12% in 2022-23. Mr. Nageswaran stressed that this comes on the back of very strong upticks in 2021-22 and 2022-23, so that this is more of a stabilisation rather than a dip.

Q4 growth to dip

“Some surprises that need further exploration relate to GVA growth remaining at 6.9% while GDP growth is being revised upwards to 7.6%. Also, the average GDP growth for the first three quarters of the year is 8.2%, implying that the fourth quarter growth would only be at 5.9%,” noted EY India chief policy advisor D.K. Srivastava.

“The data still has lot of noise in it as reflected in large swings in the discrepancy numbers for this year as well as last year. Interestingly, there has been a downward revision in the growth of demand-side drivers,” India Ratings and Research economists Sunil Kumar Sinha and Paras Jasrai said, highlighting that consumption demand remains weak and skewed towards items largely consumed by upper income households.

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