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India’s real Gross Domestic Product (GDP) grew 6.2% in the October to December 2024 period, the third quarter of the fiscal year, picking up pace from the 5.6% growth recorded in the previous quarter, according to data released by the National Statistics Office (NSO) on Friday.
However, this was considerably slower than the 9.5% growth seen over the same period in 2023. Third quarter growth trailed the Reserve Bank of India’s estimates by 0.2 percentage points.
“The rebound in growth momentum in Q3 was largely anticipated, as indicated by several high-frequency macroeconomic indicators, including improved GST collections, public spending, electricity generation, and a recovery in export performance,” said Rajani Sinha, Chief Economist at Care Edge ratings. “On the demand side, recovery in consumption growth, government expenditure and export growth look encouraging.”
Exports surge, investment slows
The growth was mostly led by a significant uptick of 8.3% in government spending and 6.9% growth in private final consumption expenditure in the third quarter, compared to just 2.3% and 5.7% respectively in the same period last year. Exports too rose 10.4% in the the third quarter of 2024-25, significantly higher than 3% growth the previous year. Imports slid 1.1%, entering negative territory. Experts say this can partly be attributed to the depreciation of the rupee.
The increase in government and private consumption offset the slowdown in investment rate, measured by the growth of Gross Fixed Capital Formation, which fell to 5.7% in Q3, from 9.3% in the year ago period.
Ambitious Q4 projection
The economy grew at 6.5% and 5.6% in the first two quarters of the current fiscal. Achieving a GDP estimate of 6.5% for the full year would require a 7.6% growth rate in the fourth quarter, said Chief Economic Adviser V. Anantha Nageswaran in a media briefing. Although this looks ambitious, he said it could be doable if three factors fall in place: a spike in exports, higher capex pickup, and huge private consumption spending prompted by the Maha Kumbh.
Economists, however, feel that the implicit fourth quarter projection is too optimistic. “The Q3 figures broadly came in line with expectations, but the implied Q4 GDP figures at around 7.5% look significantly optimistic. We expect the 2024-25 GDP figure to be lower than the Central Statistical Organisation’s estimate by around 20 to 30 basis points,” said Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank.
Aastha Gudwani, the India Chief Economist of Barclays, said the NSO’s annual growth projection was an overestimation, as the high frequency indicators reflect a “mixed bag”, forecasting that the GDP would grow at 6.2% in the current fiscal.
Global risks
On the production side, most of the rise in the Gross Value Added (output without accounting for net taxes) came from the 5.2% growth in primary sector output, compared to just 1.8% in the year ago period. This was largely thanks to agricultural production, as mining output slowed. Output growth slowed in both secondary and tertiary sectors, to 4.8% and 7.4% respectively in the December quarter, compared to 12.4% and 8.3% in the year ago period.
On the output data, Mr. Nageshwaran flagged the influence of global risks. “The near-term global economic outlook is influenced by the trade policies of major economies amid a slowing disinflation. These policies may fuel inflation, lead to tighter financial conditions, and increase market volatility,” he said.
The NSO also released the second advance estimates for the current fiscal year, and the first revised estimates for 2023-24, which showed that the real output of the economy grew at a pace of 6.5% that year, down from 9.2% in the year ago period. The data for the first revised estimates of 2023-24 and final estimates of 2022-23 were revised upwards due to a change in computation methodology, according to the NSO statement.
Published – February 28, 2025 05:58 pm IST