In Q3 FY24, India’s GDP recorded a robust growth of 8.4% YoY. The second advance estimates revised FY24 GDP growth higher to 7.6% YoY from the earlier estimate of 7.3%.

The Q3 GDP was boosted by strong growth of 32% YoY in indirect taxes net of subsidies. The growth was mainly led by a 53.6% YoY contraction in subsidy outgo in Q3. GVA growth, in fact, slowed down to 6.5% YoY from 7.7% in the previous quarter. Note that GDP = GVA + (indirect taxes – subsidies).

The manufacturing sector’s growth moderated to a still-strong 11.6% YoY in Q3 from 14.4% in the previous quarter, as operating profit growth for listed manufacturing companies slowed. The Trade+ and Financial Services+ sectors posted recovery in Q3, while growth in construction, mining, and electricity moderated. The agriculture sector contracted by 0.8% YoY. Private consumption remained subdued at 3.5% YoY in Q3, while investments posted robust growth of 10.6% YoY.

Nominal GDP growth is expected to decline to 9.1% YoY in FY24, primarily due to a steep correction in commodity prices, despite higher real GDP growth. Investment growth is expected to remain robust in FY24, even as consumption growth disappoints. The share of investment in real GDP is expected to increase to 34.1% in FY24 from a low of 30.7% in FY16.

We anticipate that FY25 GDP growth will be around 6.5% YoY. The central government’s continued focus on capital expenditure in the Interim Budget for FY25 bodes well for investment growth. However, muted rural spending in the budget may delay recovery in the rural sector.

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