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India’s FY24 GDP Surpasses Projections with 8.2% Growth Despite Weak Consumption and Investment

June 4, 2024

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India’s GDP outperformed expectations with a 7.8% increase in Q4FY24, leading to an annual growth rate of 8.2% for FY24, as reported by the National Statistical Office (NSO). This growth, which is higher than the previous fiscal year’s 7%, was fueled by strong performance in manufacturing and construction sectors, and a rise in mining activities, despite a slowdown in primary sectors and key services.

The growth for FY24, although lower than the 9.8% of FY22, represents a significant recovery from the pandemic’s impact, with the last comparable rate being 8.3% in FY17. The GDP figures were bolstered by robust indirect tax revenues and reduced subsidies, with Gross Value Added (GVA) growing at a slower pace due to these factors. The data also revealed inconsistencies, such as subdued consumer spending and a decline in investment demand, as evidenced by the Gross Fixed Capital Formation (GFCF) trends.

Finance Minister Nirmala Sitharaman highlighted the robust economic growth and the manufacturing sector’s impressive performance, attributing it to the government’s initiatives. Economists noted the discrepancy between GDP and GVA growth, attributing it to high net taxes and lower subsidies. The secondary and tertiary sectors showed growth, while the primary sector experienced modest gains. Net exports contributed positively to GDP growth for the first time in FY24, indicating a decrease in trade deficit and an increase in services surplus.

Overall, the GDP growth for FY24, despite being driven by weak deflators, suggests a strong economic performance, with expectations for continued growth in the current fiscal year. The government’s capital expenditure has been a key driver of this growth, with investment expected to remain a positive influence on the economy moving forward. The real GDP growth for FY25 is projected to range between 7% and 7.5%, supported by high capital expenditure.

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