India’s stellar economic performance for the financial year 2023-24 as projected by the advance estimates (FAE) of the National Statistical Office (NSO) with the economic sectors firing on all cylinders amidst the despair of conflicts and slowdown is a classic match to Charles Dickens’ legendary, “It was the best of times, it was the worst of times, it was the epoch of belief, it was the epoch of incredulity.” With growth in real GDP during 2023-24 estimated at 7.3 per cent as compared to 7.2 per cent in 2022-23, India stays firm on the course of the fastest-growing economy globally even as the UN’s flagship economic report presents a sombre economic outlook for the near term marked by persistently high interest rates, further escalation of conflicts, sluggish international trade and increasing climate disasters and posing significant challenges to global growth.
The epoch of belief is represented by voices which have, over time, reaffirmed faith in the India growth story, including the very recent China’s Global Times article praising India’s strides and great achievements in economic development and its economy under PM Modi which puts the country on track to becoming one of the fastest-growing major economies.
The epoch of incredulity is underlined by the sheer ability of India’s economic governance to defy global recessionary trends, supply chain shocks and vacillations of energy prices.
Economic growth in South Asia is projected at 5.2 per cent in 2024, mainly driven by a strong expansion in India, says the World Economic Situation and Prospects 2024 which highlights that consumer price inflation in India is expected to decelerate from 5.7 per cent in 2023 to 4.5 per cent in 2024 whereas regional consumer price inflation is expected to ease to 9.2 per cent in 2024, from an estimated 13.4 per cent in 2023.
The unexpectedness resonates among analysts. “After a strong growth of 7.8 per cent in the first quarter, the second quarter too surprised on the upside with 7.6 per cent growth. This takes the first half GDP growth to a robust 7.7 per cent,” says Dharmakirti Joshi, Chief Economist, CRISIL. Nomura experts
point out that despite moderation in the second half, India is expected to outperform other large economies this fiscal year. “We see no material concern on inflation and external balance,” say Nomura analysts Saion Mukherjee and Amlan Jyoti Das.
The finer details of the NSO estimates and experts pin down the more than 6 per cent growth of all economic sectors to higher government spending and a strong performance in the construction sector which has been estimated to have double digits growth of 10.7 per cent. This is not surprising as according to Nomura economists, over FY19-23, gross fixed capital formation recorded a CAGR of 8.5 per cent. The public sector GFCF was higher at 18 per cent over the period, driven by infrastructure build out and to some extent housing demand. This is reflected in strong demand in cement volume and growth in construction equipment.