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India’s GDP Growth Projection for 2023-24


The First Advance Estimates (FAEs) from the Government of India indicate a projected GDP growth of 7.3% for the current financial year (2023-24). This growth rate, slightly surpassing the 7.2% recorded in the previous year (2022-23), offers an optimistic outlook for India’s economic trajectory.


GS III: Indian Economy

Dimensions of the Article:

  1. Gross Domestic Product (GDP) Estimates Overview
  2. India’s GDP Estimates: Analysis and Factors
  3. Contributors to India’s Growth

Gross Domestic Product (GDP) Estimates Overview

Release Timeline
  • First Advance Estimates (FAE): The FAE is unveiled at the end of the first week of January annually, providing the initial growth estimates for the ongoing financial year.
Subsequent Releases:
  • Second Advance Estimates: Expected by the end of February.
  • Provisional Estimates: Anticipated by the end of May.
  • Revised Estimates: Over the next three years, MoSPI will release the 1st, 2nd, and 3rd Revised Estimates before settling on the “Actuals”/final GDP number.
Significance of FAEs
  • Data Source and Extrapolation: FAEs rely on the economic performance data available for the first 7-odd months of the fiscal year. These figures are extrapolated to generate an annual overview.
  • Budget Foundation: FAEs assume particular importance as they are the last GDP data released before the Union Budget for the forthcoming fiscal year, typically presented on February 1. They serve as the foundation for budgetary numbers.
  • Contextual Significance for 2024: This year’s FAEs gain added significance due to the upcoming Lok Sabha elections in April-May 2024. While a full-fledged Union Budget may not be presented, the FAEs still play a pivotal role in shaping economic considerations.
  • Insight into Government’s Economic Performance: The FAEs for this year provide a comprehensive snapshot of economic growth, offering insights into the economic trajectory during the ten years of the present government.

India’s GDP Estimates: Analysis and Factors

Overview of GDP Data
  • Projected GDP by March 2024: The chart indicates India’s real GDP is expected to reach nearly Rs 172 lakh crore by the end of March 2024.
  • Growth Trajectory: The growth journey is highlighted, starting from Rs 98 lakh crore when Prime Minister Modi assumed office for the first time, reaching almost Rs 140 lakh crore at the beginning of his second term.
  • Annual Growth Rate Surprise: The estimated 7.3% growth rate for 2023-24 exceeds expectations, presenting a substantial upside surprise. Initial projections anticipated growth between 5.5% and 6.5%, showcasing the strength of India’s economic recovery.
  • Deceleration in Second Term: Despite the positive outlook, there is a noticeable deceleration in growth during the second term of the Modi government compared to the first. The compounded annual growth rate (CAGR) drops from 7.4% (2014-15 to 2018-19) to 4.1% (2019-20 to 2023-24).
  • Impact of Initial Slow Growth: The poor growth rate in the first two years of the current government’s term, particularly a contraction of 5.6% in 2020-21 post-Covid, significantly influences the overall growth trajectory.

Contributors to India’s Growth

  • Four Main Engines of GDP Growth: India’s GDP growth is determined by four primary contributors on the demand side of the economy.
    • Private Final Consumption Expenditure (PFCE): Contributes nearly 60% to GDP.
    • Gross Fixed Capital Formation (GFCF): Accounts for around 30% and involves investments in boosting the economy’s productive capacity.
    • Government Final Consumption Expenditure (GFCE): Comprises about 10% of GDP.
    • Net Exports: Reflects the net spending resulting from imports and exports.
Performance of Each Component:
  • Private Consumption Demand: Expected to grow by 4.4%, showing a muted performance compared to previous terms, particularly the first term.
  • Investment Spending: Grows by 9.3% in the current financial year, signaling optimism, but concerns remain about a significant portion coming from the government.
  • Government Spending: Grows at a slow rate of 3.9%, indicating weaker growth compared to private demand.
  • Net Exports: Despite showing a negative sign, indicating more imports than exports, the drag effect has increased by 144% in the current year.
Concerns and Considerations:
  • Inequality Impact on Consumption: Growing inequality contributes to muted private consumption growth, especially in rural India.
  • Government Spending: Despite disruptions due to Covid, government spending has barely grown in the second term, raising concerns.

-Source: Indian Express


February 2024