The data needs to be seen in context. Along with strengths, it shows some areas of concern for the economy.
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The growth of the Indian economy by a robust 8.2% in the just-concluded financial year (2023-24), as seen from the provisional estimates released by the National Statistical Office (NSO), is much more than earlier projections and expectations. The RBI and the NSO had earlier projected a growth of 7% and 7.6%, respectively. The estimated 7.8% growth in the fourth quarter accounted for the higher growth rate for the full year. The NSO’s earlier estimate for the quarter was 5.9%. The new growth estimate has put the country at the top position among all major economies. This is the third year of higher than 7% economic growth, and the real GDP now stands at Rs 173.82 lakh crore against Rs 160.71 lakh crore in the previous year. The Gross Value Added (GVA) registered a growth of 6.3% in the fourth quarter and 7.2% for the whole year.
The disaggregated data gives a better picture of the economy and its areas of strength and its pain points. Manufacturing did well, growing at about 10%, though it fell from the highs recorded in the second and third quarters. Construction activity and cement and steel consumption were healthy. But trade, hotels and transportation, which provide large-scale employment, slowed down. Agriculture has continued to fare poorly, as in previous quarters. It grew at a poor 0.6% in the fourth quarter, after growing at an even lower 0.4% in the third quarter. This was mainly because of the failure of the monsoon in large parts of the country last year.
The data needs to be seen in context. Along with strengths, it shows some areas of concern for the economy. One main reason for the growth in GDP was the high growth in net taxes of over 20% and the lower subsidy outflow in the last quarter of the financial year. The divergence between the GDP and GVA is an indication of this. It has been noted that the GDP growth in the run-up to the 2019 elections also had shown a similar trend. One red flag which continues to be thrown up by the economy is the timid growth of private final consumption expenditure, even as investment has grown at a healthy pace. It has grown at just 4% for 2023-24, the slowest level seen in 12 years. This may be a reflection of the employment situation, low rural incomes and demand, and the inflationary pressures that continue. The performance of the monsoon and the Union budget for the full year, to be presented in July, will be the major determinants of the economy in the coming months.