India’s GDP likely to grow by 7.3% in FY24: NSO data

India’s economy is projected to grow at 7.3% in the ongoing financial year, as per the initial advance estimate report released by the National Statistical Office (NSO) on Friday. 

At that pace, India will retain its crown as the fastest-growing major economy, following its 7.2% GDP growth in FY2022-23. 

In nominal terms, though, the projected growth for FY24 is 8.9%, a notable deceleration from the 16.1% recorded in the preceding financial year.

Also read: India’s services growth at three-month high in December

The government anticipates a year-on-year Gross Value Added (GVA) growth of 6.9% for fiscal year 2024, slightly lower than the 7% recorded in fiscal year 2023.

Analysts and experts had anticipated the figure to hover around 7%, surpassing the government's earlier projection. This optimism stemmed from the Reserve Bank of India's adjustment of its gross domestic product forecast. 

In December, RBI elevated its growth forecast for FY24 to 7% from its initial estimate of 6.5% citing robust growth in high-frequency indicators.

Another contributing factor is the unexpectedly strong GDP figure for the September quarter. The Indian economy demonstrated a faster-than-expected growth of 7.6% year-on-year during this period, following a 7.8% expansion in the previous quarter. 

Consequently, several private economists revised their annual estimates upward in response to these positive economic indicators.

Some economists, however, expect India’s full-year economic growth to range closer to RBI’s forecast of 7%, as government expenditure, which was high during the first eight months of the ongoing fiscal year, is expected to tapper in the ongoing fourth quarter.

The government’s GDP forecast for FY2024 is essentially based on the April-November data available to it, said economist Pronab Sen, a former chief statistician of the Indian government. 

“But we know the government expenditure can stay high round the year as it was during the first eight months of the ongoing fiscal,” Sen said. “There is evidence that corporate capex has started to weaken while non-corporate capex is picking up.”

Also read: India may project higher growth estimates of around 7% for FY2024: Report

The first advance estimate is the government's inaugural GDP projection released in January. It employs the benchmark indicator method and draws on provisional data from high-frequency indicators. 

Comparing these indicators with the preceding year's figures, the government assesses the performance of various high-frequency indicators in the initial two or three quarters of the fiscal year.

The assessment incorporates provisional figures of consumer inflation, the Index of Industrial Production (IIP), revised fiscal estimates, and financial results from listed companies, among other key indicators.

The estimate released by the government for the current fiscal year came ahead of the interim Budget presentation for 2024-25 scheduled for February 1. The finance ministry will incorporate this first advance GDP estimate into its budgetary calculations.