Indian Express Update

Positive GDP Surprise: Private Consumption Growth Is Still Important

<p>Most analysts were pleasantly surprised by the government’s first advance estimate of the Gross Domestic Product (GDP) for the current fiscal year, which ends in March.</p>
<p><img decoding=”async” class=”alignnone wp-image-341373″ src=”” alt=” positive gdp surprise private consumption growth is still important gdp 2024 01 b8″ width=”1142″ height=”761″ title=”Positive GDP Surprise: Private Consumption Growth Is Still Important 3″ srcset=” 510w,×100.jpg 150w” sizes=”(max-width: 1142px) 100vw, 1142px” /></p>
<p>According to data from the Ministry of Statistics & Programme Implementation (MoSPI), growth is predicted to be 7.3% for 2023–2024. This is more than the Reserve Bank of India’s revised forecast of 7%, as well as more than the projections of the majority of economists, the IMF, and the World Bank (which were all 6.3%). The government is indicating that, even after COVID-19, India’s economy is still among the fastest-growing in the world with this most recent assessment.</p>
<p>MOSPI’s GDP estimate “seems to be relatively optimistic, surpassing the RBI’s estimate of 7% and our own projection of 6.8 percent,” according to CARE Ratings Chief Economist Rajani Sinha.</p>
<p>Is the administration exaggerating its optimism? Remember that sectoral and state government statistics for just the first eight months (April-November) are typically available for the first advance estimate, which makes accurate estimation a little challenging. With improved input data, the second advance estimate figures are expected to be revealed by the end of February.</p>
<p>Furthermore, the MoSPI’s confidence may have resulted from the government’s heavy investment in infrastructure and other initiatives during the first few months of the fiscal year. There will inevitably be a decrease in government spending as elections approach.</p>
<p>The government’s capital expenditures, or Gross Fixed Capital Formation (GFCF), increased by over a third from April to November; nevertheless, the GFCF for the whole year is estimated to have expanded by 10.3%, suggesting a notable decline after November.</p>
<p>The decline in agriculture, which is predicted to increase at only 1.8% compared to 4% in the previous fiscal year, is the main cause for worry according to the statistics. Agriculture and related industries have naturally slowed down due to declining kharif and rabi crop acreage combined with an unsatisfactory and inconsistent monsoon season, which has an effect on rural consumers’ demand. The numbers also show that total private consumption is growing slowly, with growth predicted to be just 4.4%. This is cause for worry. Lower-than-expected revenues in both rural and urban areas may be the cause of this.</p>
<p>“The demand side shows a sluggish performance of consumption growth both private and government at 4.4 per cent and 4.1 per cent respectively,” said DK Srivastava, Chief Policy Advisor at EY. With net exports depressing real GDP growth at a rate of (-)3% percentage points, the external sector remains a significant economic hindrance for India. Two significant shortcomings on the home front are the 1.4% annual inflation based on the implicit price deflator (IPD) and the 1.8% annual increase in agriculture. This suggests a nominal GDP growth of just 8.9%, which will have an effect on the size of the budgets.</p>
<p>According to Sinha of CARE Ratings, the most significant indicator moving ahead would be a broader recovery in consumer demand, which is dependent on more growth in the unorganized sector and demand in rural areas. In the end, the government’s optimism may need to be reduced until more FMCG goods fly off rural shelves and there is a strong recovery in demand for consumer durables and services in urban markets.</p>

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