India is on track to maintain its position as the world’s fastest-growing economy, with the country’s first official estimates projecting strong economic expansion for the fiscal year 2023-24. The estimates released by the Central Statistics Office indicate a GDP growth rate of 7.3%, surpassing the Reserve Bank of India’s projection of 7%. This growth follows a provisional 7.2% expansion in the previous fiscal year.
Despite six repo rate hikes by the central bank since 2022, the Indian economy is expected to thrive, supported by increased government spending and a booming construction sector. These projections come ahead of the Union Budget in February and a general election scheduled for the spring of the following year, in which Prime Minister Narendra Modi will seek a rare third term.
Key drivers of this growth are anticipated to be government investments in infrastructure and construction, as well as the resilience of the services sector. These factors are expected to counterbalance challenges posed by a global economy grappling with inflation risks and geopolitical tensions.
The country’s gross value added (GVA), a measure of income that excludes indirect taxes and subsidies, is forecasted to rise by 6.9%, slightly lower than the previous fiscal year’s 7%. The construction sector is expected to maintain its double-digit growth at 10.7%, compared to 10% in the previous year, while the mining sector is projected to grow by 8.1%, up from 4.6% in 2022-23. Nominal GDP growth, which influences the upcoming budget, is estimated to be 8.9%, down from 16.1% in the previous fiscal.
The financial services, real estate, and professional services sector is expected to grow by 8.9%, compared to 7.1% in 2022-23. However, agriculture, which still supports nearly half of India’s population, is forecasted to expand by 1.8%, a decline from 4% in the previous year. Private final consumption expenditure, a measure of consumer spending, is anticipated to grow by 4.4% in FY24.
While India’s economic prospects appear promising, the global economic outlook remains uncertain and weak, potentially posing challenges in the next fiscal year starting in April. Inflation, particularly food prices, is expected to remain a significant concern. In November, the Consumer Price Index indicated a 5.55% increase, ending a three-month decline.
The Reserve Bank of India’s revised growth forecast of 7% for 2023-24, up from 6.3% earlier, was described as a “conservative estimate” by Michael Patra, the RBI’s deputy governor. India’s economy surpassed expectations with a year-on-year growth rate of 7.6% in the September quarter, slightly lower than the 7.8% recorded in the previous quarter, leading private forecasters to revise their estimates upward.
These estimates paint a positive picture for India’s economic trajectory in the coming year, reflecting resilience and potential amid global uncertainties.
