Indian Economy Surges 8.4% In Q3 Fueled By Construction And Manufacturing Sectors' Growth
Expectations prior to the release of the GDP data hinted at a growth rate of 6.64% for Q3 FY24, significantly lower than the reported figure.
India's Q3 GDP data for the fiscal year 2023-24 brought unexpected positive surprises, with the economy expanding by 8.4% during the October-December quarter. This growth, as reported by the Statistics Ministry on February 29, defied expectations of a contraction due to various factors such as nominal government spending, sluggish industrial output, and an erratic monsoon. However, robust performance in the construction and manufacturing sectors propelled India's economy to outperform projections.
Expectations prior to the release of the GDP data hinted at a growth rate of 6.64% for Q3 FY24, significantly lower than the reported figure. Despite the strong GDP growth, concerns lingered around muted private consumption, which grew at 3.6%. Prime Minister Modi expressed optimism about sustaining rapid economic growth, emphasizing the government's commitment to improving the lives of India's population.
Chief Economic Advisor V Anantha Nageswaran acknowledged the strong GDP numbers, highlighting the ongoing structural transformation of the economy. He noted that while growth prospects appear promising, external factors pose potential risks.
Key highlights from the GDP data include:
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GDP Growth: India's GDP expanded by 8.4% in Q3 FY24, surpassing market estimates and RBI projections.
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Revised Estimates: The second advance estimate revised India's full-year GDP growth rate to 7.6% from 7.3%, reflecting an upward adjustment despite challenges in consumer spending and government expenditure. The NSO also revised GDP growth for 2022-23 to 7%.
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Top Performing Sectors: Manufacturing and construction sectors were the primary drivers of GDP growth, with double-digit expansion in manufacturing (11.6%) and solid growth in construction (9.5%).
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Weakness in Agriculture: The agriculture sector contracted by 0.8% in Q3 FY24 due to adverse weather conditions, particularly poor monsoon and El Niño impact.
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Consumption and Government Spending: Private consumption increased by 3.5%, while government consumption contracted by 3.2%. This indicates a mixed picture in terms of domestic demand.
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Trade Performance: There was a marginal decline in both exports and imports as a share of GDP during the December quarter. However, imports saw a more significant decline compared to exports.
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Investment Indicator: Gross fixed capital formation (GFCF) experienced a slight decline but picked up pace at 32.4% on an annual basis in Q3 FY24, indicating ongoing investment activities.
GDP data highlighted the contraction in government expenditure by 3.2% and a predicted increase of 1.5% in exports in rupee terms, alongside a forecasted 10.9% annual growth in imports.
Overall, India's Q3 GDP data for FY24 showcased resilience and growth momentum, driven by key sectors despite challenges in certain areas like agriculture and government spending.
