NEW DELHI: India remains on track to remain the fastest-growing economy globally, with the country’s first official estimates forecasting robust economic expansion on the back of higher government spending and a boom in the construction sector.
Estimates of gross domestic product released Friday by the Central Statistics Office pegged growth at 7.3% in 2023-24, faster than the Reserve Bank of India’s 7% projection. The economy grew at a provisional 7.2% in the last fiscal year.
Projections of strong growth amid six hikes of the repo rate by the central bank since 2022 come ahead of the Union Budget in February and a general election in the spring of next year in which Prime Minister Narendra Modi will seek a rare third term.
Government spending on infrastructure, construction and a strong services sector are set to be the key drivers of growth, despite a shaky global economy rife with inflation risks and geopolitical conflicts.
The country’s gross value added, a measure of income which strips out indirect tax and subsidies, is expected to climb 6.9%, compared to 7% in the previous fiscal.
Data released on Friday projected that the construction growth will continue in the double digits at 10.7%, compared to 10% in the previous financial year, while mining-sector growth is likely to be 8.1% in the current financial year against 4.6% in 2022-23. Nominal GDP growth, which reflects revenues on which the upcoming budget will be based, is estimated to rise by 8.9%, as against 16.1% in 2022-23.
The financial services, real estate and professional services sector is likely to grow by 8.9% against a growth of 7.1% in 2022-23, the data showed. Agriculture, which still supports nearly half the population, will expand by 1.8%, compared to a 4% expansion in the previous year. Private final consumption expenditure, which is a measure of consumer spending, is seen expanding by 4.4% in FY24.
To be sure, the global economy remains weak and uncertain, which could add more headwinds in the next financial year beginning in April. Inflation will remain a key challenge, especially food prices. Consumer prices, as measured by the Consumer Price Index, rose 5.55%, snapping a three-month decline in November.
The central bank’s revised growth forecast of 7% from 6.3% earlier for 2023-24 was a “conservative estimate”, Michael Patra, RBI’s deputy governor said last month.
The economy grew faster than expected by a wide margin of 7.6% year-on-year in the September quarter, marginally lower than the 7.8% registered in the previous quarter, prompting private forecasters to revise their estimates upwards.
