The economy is pegged to grow at 8.9 per cent in FY24 in nominal terms, compared to 16.1 per cent in the previous financial year. The government sees FY24 GVA growth at 6.9 per cent YoY, down from 7 per cent in FY23.
The government sees the manufacturing industry growing at 6.5 per cent in FY24, up from 1.3 per cent registered in FY23. This sector accounts for around 17 per cent of India’s overall GDP.
Agriculture, livestock, forestry & fishing growth, which contributes around 15 per cent to the GDP, is pegged at 1.8 per cent in FY24, down from 4 per cent in FY23.
The mining and quarrying industry, which grew at 4.6 per cent in FY23, is seen growing at 8.1 per cent in FY24.
Growth of trade, hotels, transport, communication & services related to the broadcasting industry has been pegged at 6.3 per cent in FY24, down from 14 per cent in FY23.The experts and analysts had expected the projected number to be around 7 per cent, higher than the previous government forecast, due to the Reserve Bank of India’s (RBI) revision of its GDP estimates. The RBI had increased its growth forecast in December to 7 per cent for FY24, from an earlier estimate of 6.5 per cent owing to the robust growth in high-frequency indicators. Another significant factor is the surprising GDP number for the September quarter. The Indian economy grew faster than expected 7.6 per cent year-on-year in the September quarter, after growing 7.8 per cent in the previous quarter, prompting many private economists to upwardly revise their yearly estimates.
How is the first advance estimate of GDP computed?
The first advance estimate is the first GDP estimate provided by the government in January, using the benchmark indicator method and relying on the provisional data from high-frequency indicators. The government uses last year’s numbers as a benchmark to check how some of the high-frequency indicators have performed in the first two or three quarters of the fiscal year. It relies on provisional numbers of consumer inflation, index of industrial production (IIP), revised estimates of fiscal numbers, and financial results of listed companies, among other indicators.
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How does it help?
The system of first advance estimates was introduced in 2016-17 to help with the budget exercise. The numbers from FAE are used to compute budget numbers as a proportion of GDP. It also helps the government estimate the nominal GDP for the next year, which, in turn, helps determine budget targets for the coming fiscal. The nominal GDP estimated in the budget 2023-24, for instance, was 10.5%, and the first advance estimate due on Friday will provide a gauge if the government is closer to reaching the target. The FAE will then help determine revised fiscal deficit, tax collection ratios.
The second advance estimate for FY24 is due to be released on February 29, 2024.
