India's GDP growth spurts; core sector lags at 3.6%: Report

India's GDP for the third quarter ending December 2023 soared to an impressive 8.4%, defying economists' expectations which were largely pegged between 6.5% and 7.6%. The growth momentum is anticipated to persist, with projections indicating a robust closing of FY23-24 at 7.6%, outstripping the previous fiscal year's 7.0% growth.

The unexpected surge in growth is attributed to positive developments across various sectors. Noteworthy expansions include construction at 10.7%, trade, hotels, transport, communications, and services at 6.5%, and manufacturing registering an 8.5% increase. Although agriculture and allied sectors exhibited a modest 1.8% growth from April to December 2023, the third quarter saw agriculture expanding by 0.8%, manufacturing by 11.8%, and construction by 9.5%.

Economists emphasize the pivotal role of non-agricultural sectors in driving this growth trajectory, with manufacturing and services sectors particularly contributing significantly. However, a slowdown in agricultural growth has been observed.

DK Srivastava, Chief Policy Advisor at EY India, highlights that the GDP growth for FY23-24 surpasses earlier estimates, reaching 7.6%. This growth is primarily fueled by robust non-agricultural expansion on the supply side and substantial investment growth on the demand side.

However, concerns arise regarding the sluggishness in consumption expenditure, which only grew by 3%. Additionally, India's core sector recorded a meager growth of 3.6% in January, marking the lowest in 15 months. This core sector encompasses crucial industries such as coal, crude oil, steel, cement, electricity, fertilizers, refinery products, and natural gas.

Despite these challenges, there are optimistic signals, including a healthy 14.5% growth in gross tax revenues from April to January FY23-24. Economists believe that the government is on track to achieve its fiscal deficit target of 5.8%.

India's robust economic performance stands out amidst global economic struggles, with leading economies like the UK, Japan, and the Eurozone grappling with minimal growth or the looming threat of recession.

As India continues to navigate through economic fluctuations, the resilience displayed by various sectors underscores the nation's potential for sustained growth and stability in the global economic landscape.