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GDP – Indian economy expands by a noteworthy 8.4%

The Indian economy witnessed robust growth of 8.4% in Q3FY24 as against 4.3% in Q3FY23 led by strong industrial performance backed by Government’s ‘Make in India’ campaign and impetus on infrastructure building. In contrast, agrarian sector performance remained bleak following sub-normal monsoon. Government estimates India to grow by 7.6% in FY24, as compared to 7.0% growth in the previous year. We believe Indian economy will continue to be the fastest growing economy globally led by pro-growth policies, recovering domestic demand conditions, government spending and improving capacity utilization of private firms. However, downside risks to growth emanate from slowing global growth prospects amid tight monetary conditions and volatility in financial markets. Also, rising geopolitical tensions between Russia-Ukraine and Middle East remain a concern. The same is likely to impact India’s external sectoral performance namely export growth, FDI and FPI inflows which may moderate overall growth prospects in the near term.

Sectoral performance 

Farm sector contracted by 0.8% in Q3FY24 vs 5.2% in Q3FY23

* Slumpy growth prospects of the sector may be attributed to slow progress of kharif crops at 1485.69 lk tonnes this year vis-à-vis 1557.11 lk tonnes last year. Nevertheless, pick-up in rabi acreage besides expectation of normal monsoon augurs well for the sector.  

Industrial sector depicted sharp growth of 10.4% in Q3FY24 vs 0.6% last year

* Growth was backed by strong manufacturing sector performance (11.6% in Q3FY24 vs (-) 4.8% in Q3FY23), construction (9.5% unchanged over previous year) and mining (7.5% vs 1.4%). The sector has benefited from soft input prices, recovering domestic demand conditions and improving corporate profitability. However, weakness in export demand has remained a deterrent in recent times.

Services sector grew by 7.0% in Q3FY24 vs 7.2% in Q3FY23

* Financial, real estate & professional services continued to grow near 7.0% largely unchanged from same period last year, while discretionary spending (trade, hotels, transport, communication & services) growth moderated to 7.0% this quarter as compared to 9.2% in the same period last year.

Expenditure Component

Consumption spending stood at 63.6% of GDP in Q3FY24 vs 63.8% of GDP in Q3FY23

* Private spending is likely to recover during the coming months helped by strong urban demand and recovering rural demand amid cooling inflationary pressures.

Investment rises to 29.4% of GDP from 28.8%; government spending dips to 8.5% of GDP from 9.3%

* Government spending is likely to pick up post-election with emphasis on infrastructural building and simultaneous improvement in private capex

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