Trends & Tides – India Q4 and FY24 GDP

India’s FY24 Gross Domestic Product (GDP) was revised higher to 8.2% YoY from the earlier estimate of 7.6% YoY. However, Q4FY24 GDP slowed down to 7.8% YoY from 8.6% YoY in the previous quarter.

Q4 GDP growth printed lower due to the weaker manufacturing sector. Manufacturing sector growth moderated as operating profit growth for listed manufacturing companies slowed down. The agriculture sector growth was also subdued due to weak agricultural production.

Services activity remained healthy, supported by robust construction activity. The financial sector growth was driven by double-digit credit and deposit growth. However, trade+ sector growth slowed down considerably in Q4.

On the expenditure side, private consumption stayed subdued at 4.0% YoY in Q4, while investments decelerated to 6.5% YoY from 9.7% in Q3.

For the full year FY24, agriculture growth was subdued as the erratic monsoon in 2023 impacted crop production. The turnaround in the manufacturing sector (FY24: 9.9% YoY, FY23: -2.2%) was driven by the fall in commodity prices, which boosted corporate profit margins. The services sector growth was supported by robust growth in construction and a strong performance by financial services.

Real investment growth in FY24 at 9.0% YoY significantly exceeded consumption at 4.0% YoY. The share of investment in real GDP increased to 33.5% in FY24 from a low of 30.7% in FY16. Nominal GDP growth declined to 9.6% YoY in FY24 despite higher real GDP growth, primarily due to a steep fall in the GDP deflator (inflation).

Note that GDP growth at 8.2% YoY in FY24 was significantly higher than Gross Value Added (GVA) growth at 7.2% YoY. GDP equals GVA plus ‘indirect taxes net subsidies.’ The higher GDP growth was due to the strong growth of 19% YoY in indirect taxes net of subsidies. Hence, GVA growth is a better reflection of economic activity in FY24.

We anticipate FY25 GDP growth to be around 6.8% YoY. IMD’s ‘above normal’ monsoon forecasts, government thrust on capital expenditure, and recovery in private capex bode well for growth. However, weak white-collar hiring, ‘higher for longer’ interest rates, and a volatile external environment pose downside risks.

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