India’s GDP grew at 8.4% in Q3 FY 2023-24, marking the fastest expansion in the last six quarters. The strong economic rebound defied global weakness as manufacturing, construction and investments powered this growth. However, agriculture contracted due to crop damage from unseasonal rains.
Quarterly Growth Trends
- GDP growth moderated to 4.1% in Q1 FY 2022-23 but rebounded to 8.4% in Q3 of FY 2023-24, showcasing the economy’s resilience.
- Q3 FY 2023-24 growth of 8.4% is highest in last 6 quarters, reflecting positive business confidence.
- Upward revision of full year estimates from 7.3% to 7.6% indicates broad-based nature of GDP expansion.
Analysis of Sectoral Performance
Manufacturing
- Manufacturing gallops at 11.6% versus 1.3% last fiscal on back of easing semiconductor shortages, improved domestic demand and stabilized input costs.
For instance, electronics manufacturing expanded over 60% due to global diversification from China.
- Sub-sectors like textiles, apparels and leather products also witnessed healthy expansion due to robust export demand.
Mining and Quarrying
- Mining production lagged at 0.8% growth due to heavy rains in mining belts of Jharkhand, Odisha early in the quarter.
Coal India’s output fell 6.3% during the quarter due to monsoon flooding of mines. This affected overall mining performance.
Electricity, Gas and Water Supply
- Electricity, gas and water supply output recorded firm 10.4% uptick on increased access and demand for utilities across residential and industrial categories.
Over 17.7 million households were provided tap water connections under Jal Jeevan Mission during the quarter, expanding energy usage.
Construction
- Construction GVA expanded 9.5% supported by central government and private sector infrastructure projects alongside continued momentum in housing sector.
Government’s infrastructure spending outpaced budget estimates between April-November 2022-23 while real estate demand stayed robust, evidenced in rising home sales and input orders.
Quarterly GDP Growth (%)
| Quarter | GDP Growth (%) |
| Q1 FY 2023-24 | 8.2 |
| Q2 FY 2023-24 | 8.1 |
| Q3 FY 2023-24 | 8.4 |
The table showcases the quarterly acceleration in GDP growth pointing to steady recovery.
Investment and Consumption Patterns
Fixed Capital Formation
- Gross fixed capital formation, proxy for investment activity, witnessed double-digit rise of 10.6%, signalling business confidence.
Improved capacity utilization levels beyond 75% in manufacturing sector makes larger investments attractive. This capital formation will support future output growths.
Government Consumption
- Government consumption expenditure declined 3.2%, explained by high base effect of last year when food and fertilizer subsidies had temporarily spiked welfare spendings.
Private Consumption
- Private consumption is also witnessing nascent revival, with expenditure growing 3.5% versus 2.4% last quarter as festive season spurred urban demand.
Rural consumption however remains muted as distressed rainfed cropping cycles constrain farmer incomes. Targeted income transfers for vulnerable sections can accelerate this consumption turnaround.
Global Backdrop
- India’s growth uptick amid feeble global macros plagued by monetary tightening and recession worries highlights its strong economic fundamentals.
- However, conducive international environment will further support domestic expansion through stable commodity prices and export competitiveness.
Prudent Economic Management
- Countercyclical fiscal measures like infrastructure push and welfare spending have to be balanced with price stability objectives considering inflation risks.
- As downside external risks dog global economy, supportive monetary stance tailored to evolving inflation outlooks can secure India’s growth rebound despite market volatility.
Attracting higher foreign capital flows through reliable investment policies and ease of doing business reforms will also be crucial for financing India’s growth ambitions.
- The latest Quarter 3 GDP data validates India’s macroeconomic resilience as manufacturing, construction and reviving investments script expansion despite turbulent global headwinds.
- But inflation vigil and external sector stability will need constant nurturing to make this high growth sustainable, equitable and consistent going ahead.