Govt bumps up FY24 growth estimate to 7.6%; Q3 GDP expands 8.4%

Manufacturing, construction, high tax collections boost growth.

New Delhi: The festive season proved to be a massive shot in the arm for the economy, as official data showed a sharp acceleration in growth with Gross Domestic Product (GDP) expanding at 8.4 per cent in October-December quarter (Q3), beating all forecasts by economists as well as the central bank.

Buoyed by better-than-expected third quarter numbers, the National Statistical Office (NSO) revised the full year growth target for 2023-24 to 7.6 per cent from its earlier projection of 7.3 per cent announced in January. With this, India will maintain its position as the fastest growing major economy. With 5.2 per cent projected growth, China is at the distant second.

The gross domestic product (GDP) growth numbers for the first as well as the second quarters of the current financial year have been revised upwards. The April-June quarter growth number has been revised to 8.2 per cent from 7.8 per cent and the July-September to 8.1 per cent from 7.6 per cent.

“Robust 8.4 per cent GDP growth in Q3 2023-24 shows the strength of the Indian economy and its potential,” Prime Minister Narendra Modi said in a tweet. Just ahead of the Lok Sabha elections, the GDP data will provide a boost to the economic management narrative of the government."

“Our efforts will continue to bring fast economic growth which shall help 140 crore Indians lead a better life and create a Viksit Bharat (developed India),” Modi added.

The impressive Q3 numbers were led by robust growth in the manufacturing sector, tax collections, investments and exports, even though private consumption remained subdued.

Manufacturing sector expanded at 11.6 per cent in Q3. The previous quarter manufacturing growth number has been revised upward to 14.4 per cent.

“A big boost has come from construction which has been supported all through by high thrust on roads and housing,” said Madan Sabnavis, chief economist at Bank of Baroda.

Investments emerged as the fastest growing component of GDP in Q3. Household consumption expenditure growth inched up, but remained tepid at 3.5 per cent in Q3, with rural demand perceived to be cautious after an unfavourable monsoon and urban demand assessed to be uneven as well, said Aditi Nayar, chief economist at ICRA.

The government's consumption expenditure declined by 3.2 per cent during the third quarter against a 13.8 per cent growth recorded in the previous quarter.

The Reserve Bank of India (RBI) had pegged the Q3 growth figure at 6.5 per cent while most economists’ projections were in the range of 6 to 6.8 per cent.

A downward revision in 2022-23 GDP numbers also led to a spike in the current year growth data. The GDP growth data for 2022-23 has been revised downward to 7 per cent from the earlier estimate of 7.2 per cent, while 2021-22 growth data has been revised upwards to 9.7 per cent.

Chief Economic Advisor V Anantha Nageswaran said the better-than-expected growth numbers underscore the structural transformation in the economy.

According to Nageswaran, improvement in household consumption, bright prospects for capital formation, owing to an upturn in private capex cycle and improved business sentiments would continue to drive economic growth.

“Indian economy is on a high growth trajectory supported by structural reforms and improvements in both ease and cost of doing business,” said Chandrajit Banerjee, Director General of industry body CII.