India’s economy has displayed remarkable resilience and growth momentum, with the latest GDP figures for the third quarter of the fiscal year 2023-24 surpassing expectations and outperforming previous quarters.
According to data released by the National Statistical Office (NSO), India’s GDP grew by an impressive 8.4% in the October-December period, marking the fastest pace of growth in one and a half years.
The robust expansion has prompted upward revisions for the full-year FY24 GDP growth estimates, signalling optimism and confidence in the country’s economic trajectory.
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This figure surpassed economists’ estimates, which had projected a growth rate of 6.6%. The strong performance in Q3 builds upon the momentum achieved in the preceding quarters, where growth rates exceeded 8%.
Real GDP growth rate
| Release Date | Actual | Forecast | Previous |
| Feb 29, 2024 (Q3) | 8.4% | 6.6% | 7.6% |
| Nov 30, 2023 (Q2) | 7.6% | 6.8% | 7.8% |
| Aug 31, 2023 (Q1) | 7.8% | 7.7% | 6.1% |
| May 31, 2023 (Q4) | 6.1% | 4.6% | 4.4% |
| Feb 28, 2023 (Q3) | 4.4% | 4.6% | 6.3% |
| Nov 30, 2022 (Q2) | 6.3% | 6.2% | 13.5% |
| Aug 31, 2022 (Q1) | 13.5% | 15.2% | 4.1% |
| May 31, 2022 (Q4) | 4.1% | 4.0% | 5.4% |
| Feb 28, 2022 (Q3) | 5.4% | 6.0% | 8.4% |
| Nov 30, 2021 (Q2) | 8.4% | 8.4% | 20.1% |
| Aug 31, 2021 (Q1) | 20.1% | 20.0% | 1.6% |
| May 31, 2021 (Q4) | 1.6% | 1.0% | 0.4% |
Key drivers of growth
The robust GDP growth in Q3 can be attributed to several key factors, including fixed capital formation, which refers to investment in physical assets such as machinery, equipment, and infrastructure. This component, which accounts for a 32% share in GDP calculation, recorded a substantial growth of 10.6%.
Additionally, strong manufacturing and construction activity played a pivotal role in driving overall economic expansion. Manufacturing, which accounts for 17% of India’s economy, expanded by 11.6% year-on-year in the December quarter, while the construction sector grew by more than 9%.
Investment growth remained above 10% for the second consecutive quarter, indicating sustained economic confidence and momentum.
Sector-wise performance
Examining the performance of various sectors, it is evident that certain sectors experienced robust growth while others faced challenges. The manufacturing sector emerged as a key growth driver, expanding by 11.6% in Q3.
However, the agriculture sector contracted by 0.8% in Q3, as compared with 1.6% growth in Q2, due to irregular rains during the monsoon season.
Despite this contraction, other sectors, such as mining (7.5%, up from 11.1% in the previous quarter), electricity (9% versus 10.5%), construction (9.5% compared with 13.5%), and Trade (hotels, transport, and communication) (6.7% versus 4.5%) exhibited positive growth rates, contributing to economic expansion.
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FY24 GDP estimate revised upward
The strong GDP performance in Q3 has prompted upward revisions in the full-year FY24 GDP growth estimates, reflecting greater optimism about the economy’s performance for the entire fiscal year. Initially projected at 7.3%, the revised estimate now stands at 7.6%, indicating confidence in India’s economic resilience and potential for sustained growth.
Moreover, the impressive GDP figures for Q3 have influenced growth projections for the fiscal year 2024-25. Economists and analysts have raised their forecasts for FY25 GDP growth, anticipating continued momentum and positive economic indicators. Estimates range from 6% to 7%, with factors such as public and private sector investment, consumption patterns, and global economic trends influencing the outlook for the coming fiscal year.
These upward revisions in growth estimates significantly affect monetary policy and economic management. The strong GDP growth in Q3, coupled with the revised FY24 estimates, may prompt a reevaluation of policy measures by the Reserve Bank of India (RBI).
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While the RBI has maintained a relatively hawkish stance on interest rates to combat inflationary pressures, the robust economic performance suggests potential for adjustments in policy stance. Analysts anticipate a shift towards neutrality, with potential implications for borrowing costs and liquidity management.
Conclusion
India’s GDP growth of 8.4% in Q3, coupled with upward revisions in FY24 estimates, underscores the resilience and strength of the country’s economy. Despite challenges in certain sectors, the overall trajectory remains positive, driven by factors such as investment, manufacturing, and construction activity.
Looking ahead, the outlook for FY25 appears optimistic, with continued momentum expected to support economic growth and development initiatives.
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