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India’s GDP Growth Surges to 8.2% in 2023-24

India’s gross domestic product (GDP) experienced a remarkable growth of 8.2 percent in the fiscal year 2023-24, according to new government data released recently. This surge surpasses both the government’s earlier estimate of 7.6-8 percent and the Chief Economic Advisor’s prediction of 8 percent for the same period.

A significant contributor to this growth was the strong performance in the final quarter of the fiscal year, where GDP grew by 7.8 percent. This was the lowest quarterly growth rate of the year but still played a crucial role in the annual growth rate. The preceding quarters saw growth rates of 8.2 percent, 8.1 percent, and 8.6 percent respectively.

Sectoral Contributions

The manufacturing sector demonstrated an impressive recovery, growing by 9.9 percent over the year. This marked improvement came after a contraction of 2.2 percent in the previous fiscal year. In the fourth quarter alone, manufacturing grew by 8.9 percent, a substantial increase from the 0.9 percent growth in the same quarter of the previous year. Despite a slight slowdown in Q4 compared to Q2 and Q3, the sector’s overall annual performance was robust.

The construction sector also saw significant growth, expanding by 9.9 percent, building on the previous year’s high base of 9.4 percent. In the final quarter, the construction sector grew by 8.7 percent, up from 7.4 percent in the corresponding quarter of the previous fiscal year.

Agricultural and Service Sectors

Contrastingly, the agriculture sector experienced a slowdown, growing by only 2.1 percent in 2023-24, down from 4.4 percent in 2022-23. The fourth quarter was particularly challenging, with growth plummeting to 1.1 percent from 7 percent in the same period of the previous year. This decline is attributed to erratic monsoon patterns affecting crop yields.

The tertiary sector, which includes services, grew by 7.6 percent, a reduction from the 10 percent growth seen in the previous fiscal year. Within this sector, ‘financial, real estate, and professional services’ recorded an 8.4 percent growth, slightly down from the 9.1 percent growth in 2022-23. The ‘trade, hotels, transport, and communications’ sub-sector grew by 6.4 percent, significantly slower than the 12 percent growth recorded in the previous year.

Tax and Expenditure Contributions

A noteworthy factor in the GDP growth was the 19.1 percent increase in net taxes, driven by higher tax collections and reduced subsidy payouts. This high growth in net taxes contributed to the difference between the GDP and the Gross Value Added (GVA) growth rates. GVA grew by 7.2 percent in 2023-24, up from 6.7 percent in the previous year.

Household Consumption and Capital Formation

Despite the strong overall economic performance, private final consumption expenditure, a measure of household consumption, decreased to 55.8 percent of GDP from 58 percent in the previous fiscal year. This indicates a decline in the contribution of household consumption to the economy.

Conversely, gross fixed capital formation, which measures public and private sector investments, remained stable at 33.5 percent of GDP, slightly up from 33.3 percent in 2022-23. According to D.K. Srivastava, Chief Policy Advisor at EY India, while household consumption growth remains sluggish at 4.0 percent, the primary driver of demand has been the strong growth in gross fixed capital formation at 9.0 percent.

Conclusion

In conclusion, India’s GDP growth of 8.2 percent in 2023-24 reflects a strong rebound in economic activity, driven by robust performances in the manufacturing and construction sectors, increased tax collections, and significant investments in capital formation. However, challenges remain, particularly in the agriculture sector and household consumption, which need to be addressed to sustain and build on this growth trajectory.

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