First Advance Estimates of India’s GDP, Key Highlights, Current GDP Growth

Context: India’s GDP will grow by 7.3% in the current financial year (2023-24), slightly faster than the 7.2% growth in 2022-23, the First Advance Estimates (FAEs) released by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoS&PI).

What Is the First Advance Estimate?

• Publication: Released end of the first week of January.
• “First” Estimates: Initial official GDP growth estimates for the financial year.
• “Advance” Nature: Published before the financial year (April to March) ends.
• Methodology: Based on data from the first part of the financial year.
• Use: Aids in government and business decision-making.
• Revisions: Subject to change as more data becomes available.
• Economic Indicator: Reflects economic health, influencing markets and investment.

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Key Highlights Of The First Advance Estimates

• Projected GDP Growth by March 2024: India’s GDP is expected to rise to nearly Rs 172 lakh crore (Constant Prices 2011-12).
• GDP Growth History:
  • 2014: GDP was Rs 98 lakh crore.
  • 2019: Reached almost Rs 140 lakh crore.

• Other Key Estimates for 2023-24:
  • Gross Value Added (GVA): Expected to slightly decrease from 7% in 2022-23 to 6.9%.
  • Fiscal Deficit: May exceed the target of 5.9% of GDP, reaching around 6%.
  • Farm Sector GVA Growth: Estimated to decline from 4% to 1.8%.
  • GVA in Trade, Hotels, Transport, and Communication: Projected to moderate to 6.3% from 14% in 2022-23.
  • Manufacturing GVA Growth 2023-24: Estimated to accelerate to 6.5%.
    • Notably higher compared to just 1.3% in the previous year.
  • Mining GVA Growth: Expected to increase to 8.1% in 2023-24, up from 4.6% in 2022-23.
  • Overall Economic Growth: A real growth rate of 7.3% has been estimated for 2023-24.
  • Reasons for Economic Growth: Boosted by increased state capital spending.
    • Expansion in manufacturing activities.
  • Future Projections by S&P Global Ratings: India is anticipated to remain the fastest-growing major economy over the next three years.
    • Projected to become the world’s third-largest economy by 2030.

What is Contributing/Dragging India’s Current GDP Growth?

• Private Final Consumption Expenditure (PFCE): The current year’s demand growth is expected at 4.4%, aligning with the CAGR of 4.5% during the government’s second term but lower than the 7.1% in the first term.
  • There’s a noticeable disparity in consumption growth – urban rich consumption is rising rapidly, whereas rural areas are lagging in recovery.
  • The subdued performance of private consumption, a key growth driver, is worrisome, despite the need to balance consumption with income.
• Gross Fixed Capital Formation (GFCF): Investment growth is at 9.3% in the current financial year, bringing the second term’s CAGR to 5.6%, closer to the first term’s 7.3%.
  • The majority of investment spending originates from the government, with private consumption remaining low.
• Government Final Consumption Expenditure (GFCE):
  • The smallest contributor in this method.
  • Accounts for around 10% of GDP.
  • Government spending growth is even slower than private demand growth, at just 3.9% this year.
• Net Exports:
  • Often negative in India’s case.
  • A negative sign in net exports indicates higher imports than exports, contributing to a -3 percentage point drag on real GDP growth due to weak global growth and external sector challenges.

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