India's economic growth set for strong performance, says SBI Research

India economic growth: The latest GDP figures have sent ripples of surprise and optimism throughout India's economic landscape, defying earlier projections and underlining the resilience of the nation's financial fundamentals. India's economy surged by an impressive 8.4 per cent in the third quarter of fiscal year 2023-24 (FY24), marking a major uptick from the preceding quarters and exceeding analysts' estimates, SBI Research said in its Ecowrap report.

The robust growth trajectory, characterised by a consistent performance of over 8 per cent in the past two quarters, showcases the efficacy of prudent policy frameworks and forward-looking perspectives. This unexpected buoyancy in economic activity has been attributed to several key factors, including 32 per cent year-on-year growth in indirect tax collections at Rs 3.9 lakh crore. Furthermore, the disparity between Gross Domestic Product (GDP) and Gross Value Added (GVA) growth has widened, indicating a broad-based expansion across various sectors, SBI Research said in a report authored by Soumya Kanti Ghosh, group chief economic adviser at State Bank of India.

Projections for FY24 suggest a GDP growth of 7.6 per cent and GVA growth of 6.9 per cent, with the fourth-quarter GDP growth estimated at 5.9 per cent, which many believe to be conservative. Consequently, it is increasingly likely that the overall GDP growth for FY24 could approach the remarkable 8 per cent milestone, reflecting a remarkable turnaround from earlier forecasts, SBI Research said.

Revisions in both yearly and quarterly figures have played a key role in reshaping the economic narrative. Revisions upwards of 64 basis points (bps) for FY22 and 26 bps for FY24 have stressed on the underlying strength of the economy. Despite a downward revision in FY23 GDP numbers, the fiscal deficit for FY24 as a percentage of GDP is expected to be revised upwards to 5.9 per cent, highlighting the evolving fiscal landscape.

A deeper dive into sectoral performances reveals a stellar show across manufacturing and services, propelled by a favourable base effect from the previous period. Industries such as manufacturing, electricity, gas, water supply, and construction have showcased strong growth rates, while the services sector surged above 7 per cent. However, agriculture has faced challenges, witnessing a decline of -0.8 per cent in Q3 FY24.

The government's concerted efforts to enhance the quality of life for citizens and curb leakage of benefits through Direct Benefit Transfer (DBT) mechanisms have yielded tangible results. Per capita GDP at current prices crossed the Rs 2 lakh mark in FY24, with a decade-long Compound Annual Growth Rate (CAGR) of 8.9 per cent. Even in constant prices, per capita GDP has witnessed a substantial increase, signalling a remarkable post-pandemic recovery, SBI Research said.