India’s GDP growth soars to 8.2% in FY24; PM Modi says ‘just a trailer of things to come’

India’s economic growth soared to 8.2% in the financial year 2023-24, a sharp jump from 7% recorded in the previous year, led by a robust performance of manufacturing and construction sectors, as per data released by the government on May 31.

Beating expectations of analysts as well as the government, including the Reserve Bank of India (RBI), the country’s gross domestic product (GDP) grew by 7.8% in the fourth quarter of FY 2023-24.

In its April monetary policy review the RBI had pegged the Q4 growth number at 7%. Most economists and analysts had predicted the Q4 growth data below 7%. Full year number is sharply higher than 7.6% growth estimated by the National Statistical Office (NSO) in February.

Reacting to the NSO data, Prime Minister Narendra Modi said the “high” annual growth rate of 8.2% in FY24 is “just a trailer of things to come.”

“Thanks to the hardworking people of our country, 8.2% growth for the year 2023-24 exemplifies that India continues to be the fastest growing major economy globally. As I’ve said, this is just a trailer of things to come,” Modi wrote on X (formerly Twitter).

This is the third successive year of above 7% GDP growth. India’s economy expanded by 7.6% in FY 2021-22 and 7% in 2022-23. With the robust 2023-24 numbers, India has further consolidated its position as the fastest growing major economies. With 5.2% growth China stands at distant second followed by Indonesia at 5.1% and Mexico 3.2%.

Lower inflation played a key role in the robust FY24 GDP growth number. Nominal GDP growth in 2022-23 was 14.2%, while the real GDP growth stood at only 7%. During the financial year 2023-24, the real GDP growth is higher despite lower nominal GDP growth numbers.

“While the high frequency indicators were showing healthy economic momentum, nevertheless the sharp jump in GDP growth number for FY24 has come as a positive surprise,” said Rajani Sinha, chief economist at CareEdge Ratings.

Better-than-expected numbers are likely to give a boost to Prime Minister Narendra Modi-led Bharatiya Janata Party (BJP) in the national election. The GDP data is released a day ahead of the seventh and final phase of polling for the Lok Sabha, the lower house or parliament.

Real GDP or GDP at constant prices increased to Rs 173.82 lakh crore in 2023-24 from Rs 160.71 lakh crore in the previous year, registering a growth of 8.2%, data released by the National Statistical Office (NSO) showed.

“This remarkable GDP growth rate is the highest among the major economies of the world,” said Finance Minister Nirmala Sitharaman.  

“It is worthwhile to note that the Manufacturing sector witnessed a significant growth of 9.9% in 2023-24, highlighting the success of the Modi government’s efforts for the sector,” Sitharaman said in a social media post on X.

The third quarter growth data has been revised upwards to 8.6% from 8.4%. In Q1 growth stood at 8.2% and Q2 at 8.1%. Despite beating the analyst expectations, the Q4 number is the weakest in a year.

Real gross value added (GVA) growth accelerated to 7.2% in 2023-24 from 6.7% in 2022-23. This GVA growth has been mainly due to significant growth of 9.9% in the manufacturing sector in 2023-24 over a contraction of 2.2% in 2022-23.

GVA is the value of goods and services produced in a country minus input costs, including raw materials. It adjusts GDP by adding subsidies and deducting taxes on products.

DK Srivastava, Chief Policy Advisor, EY India, said the large investment push by the government is the main growth driver.

While private final consumption expenditure growth is still languishing at 4%, the main demand side push is coming from gross fixed capital formation which has grown at 9%, Srivastava said.

“The investment growth has largely been driven by the Government of India’s capital expenditure growth,” Srivastava added.

“GDP surprised to the upside, thanks to strong growth in manufacturing and robust buoyancy in the services sector,” said Rumki Majumdar, Economist, Deloitte India

“With exports considerably outpacing imports, net exports substantially boosted overall growth numbers. Notably, the fourth quarter of FY 2024 saw a prominent increase in exports of engineering goods, electronics items, drugs and pharmaceuticals, and organic and inorganic chemicals—the highest-ever exports recorded in history. That is good news as India is gradually moving up the global value chain,” Majumdar added.