The National Statistical Office or NSO has revised its estimates for Bharat’s economic growth in the ongoing financial year, forecasting a growth rate of 7.6 per cent. This figure marks an increase from the previous estimate of 7.3 per cent. However, both estimates indicate that gross value added-GVA is expected to grow at 6.9 per cent for the year. The disparity between GDP and GVA growth rates suggests that net taxes on products may be a contributing factor. Notably, in the third quarter, while GVA growth was estimated at 6.5 per cent, GDP growth stood at a robust 8.4 per cent.
Analysis Points to Surge in Net Taxes on Products
Analysts attribute the gap between GDP and GVA growth to a surge in net taxes on products. However, concerns arise about the sustainability of this trend. Furthermore, substantial revisions in previous data reveal a decline in value added in the economy from 8.2 per cent in the first quarter to 6.5 per cent in the third quarter.
Sector-Wise Performance Reveals Mixed Results
The agricultural sector demonstrates subdued growth, with an estimated increase of only 0.7 per cent in FY 2023-24, a significant decline from the 4.7 per cent growth observed in the previous fiscal year. In the third quarter alone, value added by the agricultural sector fell by 0.8 per cent. Conversely, the industrial sector, including mining, manufacturing, electricity, gas, water supply, and construction, has shown a promising uptick, with a growth rate of 9 per cent this year. This growth is primarily attributed to improvements in manufacturing and sustained performance in construction.
Manufacturing and Construction Sectors Lead Growth
Manufacturing, which had experienced a contraction of 2.2 per cent last year, is now expected to grow by 8.5 per cent in FY 2023-24. This positive trajectory is supported by data from the index of industrial production. Additionally, the construction sector is forecasted to grow by 10.7 per cent this year, up from 9.4 per cent in the previous fiscal year.
Services Sector Faces Mild Deceleration
In contrast, the services sector has experienced a slight deceleration compared to the previous year. Segments such as trade, hotels, transport, communication, financial services, real estate, professional services, and public administration have shown slower growth rates.
Consumption Lags Behind, Investment Remains Strong
Despite overall economic growth, consumption remains lacklustre, with private spending increasing by only 3.5 per cent in the third quarter and expected to grow by 3 per cent for the full year. However, investment activity continues to be a bright spot, growing by 10.2 per cent for the full year.
Implications for Fourth Quarter Growth
The NSO’s latest estimates suggest that the economy is likely to grow by 5.9 per cent in the fourth quarter, raising questions about the sustainability of the current growth trajectory and the factors driving it.
