Udayan Hazarika
(The writer can be reached at udayanhazarika@hotmail.com)
The Ministry of Statistics and Programme Implementation (MOSPI) has published (31-04-24) their provisional estimates of gross domestic product for the year 2023–24 (FY 24) and the fourth quarter performance of the economy for the same year. The estimates show a remarkable recovery of the economy from the grip of a 7.0 percent annual growth rate towards achieving an estimated 8.2 percent growth for FY24, as against the 7.6 percent estimated after the second advanced estimate made during February this year. Meanwhile, the IMF has revised upward the GDP growth projection for India for FY24 to 7.8 percent as against its January figure of 6.7 percent. Similarly, observing the growth of India’s secondary sector, the ADB has also revised its earlier projected rate of growth from 6.3 percent (September 2023) to 6.7 percent. In absolute terms, the estimated real GDP now comes to Rs 173.82 lakh crore for FY 24 as against the Rs 160.71 lakh crore estimated (first revised estimate) for 2022–23. It may be noted that both the estimates are based on benchmark indicators, and therefore the actual figures, when arrived at in the next year, may vary significantly between 1.0 and 1.7 percent.
In tune with the revision of the estimated annual growth rate as indicated above, the MOSPI has also revised upward the estimated quarterly growth figure for Q3 from 8.4 percent to 8.6 percent. Accordingly, the quarterly figures now stand at 8.2 percent for Q1, 8.1 percent for Q2, 8.6 percent for Q3, and 7.8 percent for Q4. From the above, it appears that there has been a slowdown in Q4, and we will now examine where or in which component of the GDP the adjustment has been made to show this slowdown and thereafter analyse the annual GDP on a year-on-year basis. On the expenditure front, compared to other quarters, private final consumption expenditure (PFCE) for Q4 has a significant fall from 58.9 percent in Q3 to 52.9 percent in Q4—the lowest amongst all quarters. The fall may be attributed to the rising inflationary pressure on food items. Since PFCE is the largest contributor to the GDP, a small fall in this component leads to a large fall in the GDP. Apart from this, the estimated performance in the external sector is also not quite significant. All through the year, exports remained sluggish and low compared to the QoQ during the first to third quarter but equalized in the 4th quarter. Similarly, imports were rising in the first two quarters but equalized in the third quarter, with a slight fall in the fourth quarter. Apart from this, performance in respect of other sectors, as estimated, is satisfactory.
The annual estimated growth rate of 8.2 percent in the case of real GDP for the years 2023–24 is quite satisfactory despite the reigning food inflation for the majority of the third and fourth quarters. This revised enhanced growth rate is achieved mainly due to a stabilized expenditure pattern in private final consumption expenditure (PFCE), which marginally fell to 55.8 percent from 58 percent the previous year. Similarly, in respect of gross fixed capital formation (GFCF), an estimated rise of 0.2 percentage points is shown, and in the case of government final consumption, the expenditure fell by an estimated 0.5 percentage point to 9.5 percent from 10 percent of the previous year (2022–23). In the external sector, imports have risen by an estimated 2.45 percent, but exports fell by about 5.02 percent.
On the demand side, the real gross value addition is estimated to rise by 7.2 percent as against 6.7 percent in 2022–23. Undoubtedly, the major contributory factor to this growth is the secondary sector, which is estimated to grow by 9.7 percent as against 2.1 percent in FY 23. The growth in the manufacturing sector is remarkable, estimated at 9.9% as against a contraction of 2.2 percent in the previous year. The available figures regarding growth in the manufacturing sector show a growth of 11.6 percent for FY 24. The sector failed in the previous year (FY23) to get as many export orders as was targeted, and as a result, there was a fall in the growth rate to the tune of 1.1 percent in Q3. But the present estimated figures undoubtedly show a turnaround in the sector, with the highest-ever export of $447.46 billion, indicating a growth of 6.03 percent.
The contribution of the primary sector to total gross value addition is estimated at 16.65 percent. The sector could not live up to the standard as it is estimated to grow by only 2.1 percent as against 4.4 percent in FY23, which is also on the lower side. Although Q1 and Q2 remained competitive compared to 2022–23, the estimated fall in output appears to have been drastic in the last two quarters. The government has already pegged the food grain production estimates for both the kharif and rabi crops at 6.1 percent lower in FY24 in view of the poor monsoon due to the El Nino effect. The total food grain production has been estimated at 309 million metric tonnes as per advanced estimates, compared to 329.6 million metric tonnes estimated for the year 2022–23. However, the allied sector, i.e., mining and quarrying, has maintained a standard rise in output. The growth in this sector was robust across all quarters on a QoQ basis, although the sum total contribution of the sub-sector comes to only 7.5 percent as against 1.9 percent of the previous year.
It is, in fact, the secondary sector that has taken the lead in the overall growth rate of the economy, as discussed above. Compared to last year, the performance is far better; although Q1 growth was of an average pattern with 5.9 percent, the growth in the remaining quarters is dynamic at an average of 11.07 percent. The achievements made in the construction sector during 2022–23 have been taken forward, with further growth in the later three quarters.
The slowdown in the tertiary sector in FY24 is a matter of concern. The sector is responsible for more than 50 percent of the contribution to the GDP, which is estimated at 54.61 percent for FY24 as compared to 54.43 percent in the previous year. In terms of GVA, there was an estimated fall from the previous year’s 10 percent growth to 7.6 percent. Among the sub-sectors, there will be an estimated fall to 6.4 percent, as against 12 percent the previous year. Similarly, in the case of real estate, professional services, etc., growth fell slightly to 8.4 percent from 9.1 percent of the previous year, and in the case of public administration, defence, etc., growth fell to 7.8 percent from 8.9 percent of the previous year. Tertiary sector growth is almost unpredictable, even in a normal year. Fluctuations in private trading activities, coupled with business fluctuations due to social unrest, etc., disrupt expectations in this sector.