The National Statistical Office (NSO) has revised its estimates for Bharat’s economic growth in the ongoing financial year, forecasting a growth rate of 7.6%. This figure marks an increase from the previous estimate of 7.3%. However, both estimates indicate that gross value added (GVA) is expected to grow at 6.9% for the year. The disparity between GDP and GVA growth rates suggests that net taxes on products may be a contributing factor. Notably, in the third quarter, while GVA growth was estimated at 6.5%, GDP growth stood at a robust 8.4%.
Analysis Points to Surge in Net Taxes on Products
Analysts attribute the gap between GDP and GVA growth to a surge in net taxes on products. However, concerns arise about the sustainability of this trend. Furthermore, substantial revisions in previous data reveal a decline in value added in the economy from 8.2% in the first quarter to 6.5% in the third quarter.
Sector-Wise Performance Reveals Mixed Results
The agricultural sector demonstrates subdued growth, with an estimated increase of only 0.7% in FY 2023-24, a significant decline from the 4.7% growth observed in the previous fiscal year. In the third quarter alone, value added by the agricultural sector fell by 0.8%. Conversely, the industrial sector, including mining, manufacturing, electricity, gas, water supply, and construction, has shown a promising uptick, with a growth rate of 9% this year. This growth is primarily attributed to improvements in manufacturing and sustained performance in construction.
Manufacturing and Construction Sectors Lead Growth
Manufacturing, which had experienced a contraction of 2.2% last year, is now expected to grow by 8.5% in FY 2023-24. This positive trajectory is supported by data from the index of industrial production. Additionally, the construction sector is forecasted to grow by 10.7% this year, up from 9.4% in the previous fiscal year.
Services Sector Faces Mild Deceleration
In contrast, the services sector has experienced a slight deceleration compared to the previous year. Segments such as trade, hotels, transport, communication, financial services, real estate, professional services, and public administration have shown slower growth rates.
Consumption Lags Behind, Investment Remains Strong
Despite overall economic growth, consumption remains lackluster, with private spending increasing by only 3.5% in the third quarter and expected to grow by 3% for the full year. However, investment activity continues to be a bright spot, growing by 10.2% for the full year.
Implications for Fourth Quarter Growth
The NSO’s latest estimates suggest that the economy is likely to grow by 5.9% in the fourth quarter, raising questions about the sustainability of the current growth trajectory and the factors driving it.
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