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| What is next for the Indian economy 2024? |
The National Statistical Office (NSO) has reported that India's Gross Domestic Product (GDP) grew by an impressive 8.2% in the fiscal year 2023-24, exceeding all economic forecasters' predictions. This robust growth figure not only surpassed the NSO's own advance estimate of a 7.6% increase for the previous year but also indicates a significant economic recovery and resilience.
Breaking down the quarterly performance, the GDP for the January to March 2024 quarter rose by 5.9%, compared to the 8.4% growth recorded in the third quarter. The fourth quarter saw a growth rate of 7.8%, slightly lower than the revised 8.6% growth in the preceding three months. Despite this deceleration, the overall economic trajectory remains positive.
However, private consumption, which is a critical factor for the revival of industrial investments, remained relatively weak. Nonetheless, it showed slight improvement over the performance in the first half of the year, signaling cautious consumer optimism.
In its latest monetary policy review conducted earlier this month, the Reserve Bank of India (RBI) revised its GDP growth projection for 2024-25 to 7.2%, up from its previous estimate of 7%. This adjustment reflects a more optimistic outlook on India's economic performance in the coming year.
The RBI also noted a downward trend in retail inflation, which is expected to average 4.5%, a significant decrease from the 5.4% average recorded last year. This decline in inflation could provide a much-needed boost to consumer purchasing power and overall economic stability.
Initial indicators for the first two months of the current fiscal year suggest a somewhat subdued start. According to data released on June 12, industrial output growth in April slowed to a three-month low of 5%. This slowdown in industrial activity could be a temporary setback, potentially influenced by various transient factors such as supply chain disruptions or seasonal adjustments.
On a positive note, Goods and Services Tax (GST) collections, which serve as a proxy for consumption and economic activity, surged to a record high of over ₹2 lakh crore in April. This spike in GST collections can be attributed to year-end compliances and increased economic activities towards the fiscal year-end. Such high GST collections are a positive indicator of economic health and suggest that the underlying consumption trends are stronger than the industrial output figures might initially imply.
Overall, while there are mixed signals in the early part of the new fiscal year, the strong GDP growth of 8.2% in 2023-24 and the revised projections by the RBI provide a solid foundation for cautious optimism. The challenges of subdued private consumption and industrial output need to be addressed, but the high GST collections and decreasing inflation rate offer hope for sustained economic growth in the months ahead.
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