Indian Economy Accelerates to 8.4% in Q3 2023, Exceeding Expectations

New Delhi: On the back of double-digit growth in manufacturing sector, followed by a good growth rate of mining & quarrying and construction sector among others, Indian economy accelerated to 8.4 per cent in October-December 2023 against 4.3 per cent a year ago, showing at its fastest pace in one-and-half years in the final three months of 2023. However, the government in its second advance estimate of national accounts, pegged the country’s economic growth at 7.6 per cent for 2023-24, the government data showed on Thursday.

The growth rate was much faster than economists’ forecasts of 6.6 per cent as seen in a Reuters poll, and higher than the revised growth of 8.1 per cent in the previous quarter. Welcoming the GDP numbers that beat the expectations, Prime Minister Narendra Modi also said the robust 8.4 per cent GDP growth in Q3 2023-24 showed the strength of the Indian economy and its potential. “Our efforts will continue to bring fast economic growth which shall help 140 crore Indians lead a better life and create a Viksit Bharat!,” the Prime Minister said in X (formerly known as Twitter).

Briefing the media on the robust GDP number, chief economic advisor (CEA) V Anantha Nageswaran said that overall the Indian economy ticks all the boxes in the right way. “Urban demand conditions remain resilient, accompanied by a recovery in rural demand, while the growth in rural demand and income is expected to pick up next fiscal with a recovery in the farm sector growth. We expect private capex to gain further traction in FY25. It's not appropriate to expect all the sectors of a large and diverse economy like India to perform very well at the same time,” Mr Nageswaran said.

“Besides, a structural transformation of the economy is underway, both in terms of digital infra and physical infra. India's external sector shows no signs of vulnerability despite global headwinds. The government’s commitment towards efficient fiscal management remains intact. And the private sector capex is not a story for the future, it's happening now,” he said, adding that there is evidence of sustained investment activity.

As per the data released by the National Statistical Office (NSO), the Indian economy recorded a growth of 8.4 per cent in the third quarter of this fiscal (October-December 2023). The NSO had projected a growth of 7.3 per cent for the current fiscal in its first advance estimates released earlier in January 2024. It also revised the GDP growth for 2022-23 to 7 per cent against the earlier estimate of 7.2 per cent.

“The real GDP or GDP at constant (2011-12) prices in the year 2023-24 is estimated to attain a level of Rs 172.90 lakh crore, against the FRE of GDP for the year 2022-23 of Rs 160.71 lakh crore. The growth rate of GDP during 2023-24 is estimated at 7.6 percent as compared to growth rate of 7.0 percent in 2022-23. The nominal GDP or GDP at current prices in the year 2023-24 is estimated to attain a level of Rs 293.90 lakh crore, against Rs 269.50 lakh crore in 2022-23, showing a growth rate of 9.1 percent,” the NSO data showed.

“While the GDP at constant (2011-12) prices in Q3 of 2023-24 is estimated at Rs 43.72 lakh crore, against Rs 40.35 lakh crore in Q3 of 2022-23, showing a growth rate of 8.4 percent. The GDP at current prices in Q3 of 2023-24 is estimated at Rs 75.49 lakh crore, as against Rs 68.58 lakh crore in Q3 of 2022-23, showing a growth rate of 10.1 percent,” it showed.

The data also showed that the manufacturing sector, which for the past decade has accounted for just 17 per cent of Asia’s third-largest economy, expanded 11.6 per cent year-on-year in the December quarter, compared with a revised 14.4 per cent in the previous three months. “The farm sector, which accounts for about 15 per cent of the $3.7 trillion economy, contracted 0.8 per cent, compared with 1.6 per cent growth in the September quarter,” it said.

Looking ahead, the economists expect that economic activity will moderate over the coming quarters but it should still remain exceptionally strong, which will limit the need for policy loosening for a while.