India's GDP Growth Exceeds Expectations At 7.8% In Q4, 8.2% In Fiscal 2024
India's recovery remained on track in the fourth quarter of fiscal 2024, with the economy performing better than expected.
India's economic growth continued to print better than expected in the fourth quarter of fiscal 2024 and for the full fiscal, led by expansion in industry and higher capex.
The gross domestic product rose to 7.8% in the January-March quarter, according to the latest estimates released by the government's statistical office on Friday.
It estimated that gross value added, excluding indirect tax and subsidies, rose 6.3% during the period.
For the full year, GDP is estimated to have grown by 8.2%.
GDP was estimated to increase by 7% in the fourth quarter, according to economists polled by Bloomberg. GVA growth was pegged at 6.2%.
For the full year, a Bloomberg poll of economists estimated GDP growth at 7%.
India continued to observe a divergance in the GDP and GVA as seen in Q3 of FY24 largely led by favourable uptick in indirect taxes and keeping to subsidy targets. However an India official with knowledge of the matter noted that the wedge could possibly reduce as GDP improves and the pace of growth of taxes adjusts against a higher base going forward.
For now, the divergance is not abnormal, the official added.
Finance Minister Nirmala Sitharaman reacted to the GDP numbers, calling it "remarkable" and noted that the manufacturing sector witnessed a significant growth of 9.9% in FY24, "highlighting the success of the Modi government's efforts for the sector".
Key Highlights
Q4 FY24: By Industry
Agriculture rose at 0.6% in Q4, compared with 0.4% in Q3.
Mining rose 4.3% as against 7.5% in the previous quarter.
Manufacturing expanded 8.9% as against 11.5% over the preceding quarter.
Electricity and other public utilities increased 7.7% versus 9% in Q3.
Construction rose 8.7% in Q4, as compared with 9.6% in Q3.
Trade, hotel, transport, and communication expanded 5.1%, as compared with 6.9% over the previous quarter.
Financial services sector rose 8.4% as against 9.1% in Q3.
The public administration segment increased 7.8%, as compared with 8.9% in Q3.
Agricultural growth was encouraging given the sub-par monsoons and the effect on kharif and rabi crops, stated a research note by the Bank of Baroda. The turnaround in manufacturing is significant and can be attributed to the negative base effect and higher profits that were recorded by the companies, the note explained. Construction too was strong and services remained buoyant.
Q4 FY24: By Expenditure
Private final consumption expenditure rose by 4%.
Government final consumption expenditure increased by 0.9%.
Gross fixed capital formation rose by 6.5%.
On the expenditure side, as expected, the growth has been mainly led by the government's strong capex, stated a note by Rajani Sinha, chief economist at Care ratings. A strong uptick in overall export growth, along with moderation in import growth, also supported the growth momentum in Q4. However, the concerning aspect is that the private consumption growth has remained feeble, she said.
FY24: By Industry
Agriculture rose at 1.4% in FY24, as compared with 4.7% in FY23.
Mining rose 7.1% as against 1.9% in the previous fiscal.
Manufacturing expanded 9.9% as against a contraction of 2.2% over the preceding fiscal.
Electricity and other public utilities increased 7.5% versus 9.4% in FY23.
Construction rose 9.9% in Q4, as compared with 9.4% in FY23.
Trade, hotel, transport, and communication expanded 6.4%, as compared with 12% last year.
Financial services sector rose 8.4% as against 9.1% in FY23.
The public administration segment increased 7.8%, as compared with 8.9% in FY24.
Q4 FY24: By Expenditure
Private final consumption expenditure rose by 4%.
Government final consumption expenditure increased by 2.5%.
Gross fixed capital formation rose by 8.9%.
Slower Growth Ahead
Despite today's stronger-than-expected print and consequent high base, Barclays forecasts FY25 GDP growth at 7.0%. "We expect the steady domestic growth momentum to continue, supported by continued increases in government capex (albeit at a slower pace), the much-anticipated rising private investment, some recovery in rural consumption, even if cylical, and recovery in exports with the uptick in global trade," Shreya Sodhani, regional economist at Barclays, said.
However, monetary policy expectations suggest rates will remain elevated for longer, creating some headwinds for growth, she said. In addition, softening GVA for three straight quarters, suggest growth could ease from FY24.
