The National Statistical Office (NSO) on Thursday increased India’s real GDP growth estimate for this year to 7.6% from the 7.3% projected last month, causing a flurry of revisions in the economy’s growth estimates. Additionally, it increased its 2021–22 growth estimate from 9.1% to 9.7% and decreased its 7.2% growth estimate for 2022–2023 to 7%.
The economy’s Gross Value Added (GVA) is expected to grow by 6.9% this year; last year’s GVA growth was downgraded by the NSO from 7% to 6.7%. GDP growth increased to 8.2% and 8.1% for the first two quarters of this year, and it increased even further to 8.4% for the third quarter of 2023, which runs from October to December.
When revised estimates of 8.2% and 7.7% growth in Q1 and Q2, respectively, dropped to just 6.5% in Q3, economists were taken aback. Additionally, worries remained regarding private consumption, which increased by 3.5% in Q3 from 2.4% in Q2, and the full-year growth estimate was revised down from 4.4% in early January to 3%.
ailing agriculture industry
The farm sector’s gross value added (GVA) growth shrank to 0.8% in the third quarter, and for the entire year, growth is now only predicted to be 0.7%, as opposed to 4.7% in 2022–2023. Chief Economic Advisor V. Anantha Nageswaran stated that industrial growth drove growth this year and he anticipates the farm sector to rebound next year. Construction, up 10.7%; manufacturing, up 8.5% from a 2.2% decline in 2022–2023; and mining, up 8.1% from 1.9% last year, have all contributed to the acceleration of GVA growth.
The growth upgrade this year was ascribed by Kotak Mahindra Bank’s chief economist, Upasna Bhardwaj, to the downward revision of last year’s growth figures, as well as to stronger investment and net exports—despite the fact that consumption is still trailing. The fact that the GDP is significantly higher but the GVA estimates for this year have remained unchanged is more intriguing, the speaker added.
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The employment-intensive trade, hotel, transportation, communications, and broadcasting services sectors are predicted to see nearly half of their GVA growth—from 12% in 2022–2023 to 6.5% in 2023–2024. Mr. Nageswaran emphasized that this is more of a stabilization than a decline because it follows two extremely strong upticks in 2021–2022 and 2022–2023.
Q4 growth will slow
The fact that GDP growth is being revised up to 7.6% while GVA growth stays at 6.9% is one of the surprises that requires more investigation. Additionally, the average GDP growth for the year’s first three quarters is 8.2%, suggesting that the growth in the fourth quarter would only be 5.9%, according to D.K. Srivastava, chief policy advisor at EY India.
The discrepancy numbers for both this year and last year show significant swings, which indicates that there is still a lot of noise in the data. The growth of demand-side drivers has interestingly slowed down, according to economists Sunil Kumar Sinha and Paras Jasrai of India Ratings and Research. They also pointed out that consumption demand is still low and still heavily weighted toward goods that are primarily purchased by higher-class households.
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