New Delhi: The Indian economy grew by 8.4% during the October-December quarter of FY24, according to data released by the Statistics Ministry on Thursday, February 29.
This is higher than the Reserve Bank of India’s estimate of 6.5%, according to National Statistical Office (NSO) of Ministry of Statistics and Programme Implementation (MoSPI).
During the third quarter of FY23, GDP was recorded at 4.4%.
The entire fiscal year’s (FY24) GDP growth has been estimated at 7.6% as compared to growth rate of 7% in FY23.
“Double-digit growth rate of construction sector (10.7%), followed by a good growth rate of manufacturing sector (8.5%) have boosted the GDP growth in FY 2023-24,” Business Standard reported.
However, according to economists, there are chances of some deceleration in the numbers, Livemint reported. They are predicting a slowdown from the sharp 7.6% growth recorded in the September quarter of the current fiscal year.
A look at GVA growth
According to an analysis by business journalist Latha Venkatesh, the relation between the GDP and GVA (gross value added) seems to be confusing. This divergence, per experts, is due to the strong tax growth in the quarter.
GVA growth was closer to expectations at 6.5%, Reuters reported.
The GVA for FY24 is anticipated to be 6.9%, up from 6.7% in the previous year.
GVA growth is important when analysing GDP data because it provides a more detailed view of economic performance. GDP measures the total value of goods and services produced within a country’s borders, while GVA specifically focuses on the value added by each sector of the economy.
“Something odd about the current year GDP number: Q3 GDP is up 8.4% yoy, but GVA is up only 6.5%; year ago I.e. FY23 Q3 GDP is up 4.3%, but GVA IS UP 4.8%. Relation between GVA & GDP is confusing,” said Venkatesh.
Something odd about the current year GDP number: Q3 GDP is up 8.4% yoy, but GVA is up only 6.5%; year ago I.e. FY23 Q3 GDP is up 4.3%, but GVA IS UP 4.8%. Relation between GVA & GDP is confusing 1/2
Advertisement— Latha Venkatesh (@latha_venkatesh) February 29, 2024
“The Q3 GDP number at 8.4% is way above street estimates of 6.7%, but GVA at 6.5% is entirely in line with street estimate. GDP is GVA plus taxes minus subsidies, probably the 15% higher tax collection this year is creating the divergence,” she said.
Reuters reported that GDP data indicated that investment growth continues to outpace consumption growth by a huge margin.
The internals signal that agriculture growth remains weak, while manufacturing and services continue to push up growth, Sakshi Gupta, Principal Economist, HDFC Bank, Gurugram, told Reuters.
“The Q3 data on India’s growth threw up a divergent trend, with the GVA growth moderating broadly on expected lines to 6.5% and the GDP expanding by a much higher-than-anticipated 8.4%,” Aditi Nayar, Chief Economist, ICRA Ltd, Gurugram, told Reuters.
“This wide gap followed a surge in the growth of net indirect taxes to a six-quarter high of 32% in this quarter, which is unlikely to be sustainable. In our view, it may be more appropriate to look at the trend in the GVA growth to understand the underlying momentum of economic activity.”
“Investments emerged as the fastest growing component of GDP in Q3 FY2024 and displayed a mild sequential dip, contrary to the sharp slowdown seen in government capex. Amid the sharp upside surprise in the headline GDP growth number, the contraction in the government’s revenue expenditure and capital expenditure, as well as the slide in the core sector growth in January 2024, offer some sobering trends,” she said.
“The sharp upward revision to the GDP comes on the backdrop of downward revision to FY23 figures and stronger investment and net exports in FY24, but lagging consumption,” Upasna Bhardwaj, Chief Economist Kotak Mahindra Bank, Mumbai, told Reuters.
“More intriguing is that gross value-added estimates for FY24 have been left unchanged, while GDP is sharply higher.”
