GDP growth for FY24 has been revised to a high of 8.2% and comes over 7% in FY23.
A statement issued by the Bank of Baroda and highlights the GDP growth in a welcoming note.
– The Q4 growth number is at 7.8% which has pushed up the overall growth number. For the first 3 quarters, growth rates have been at above 8%.
– One factor driving up GDP growth has been the high growth in net taxes by 19.1% which is due to a combination of higher tax collections and lower subsidy pay out. GVA growth was 7.2% for the year. Hence, net taxes growth has contributed to the difference of 1% growth between GVA and GDP. For Q4 the difference was as high as 1.5%.
– In nominal terms growth has been 9.6% which takes it up to Rs 295 lakh crore (as against Rs 286 cr in the budget). The low gap between nominal and real GDP growth numbers can be attributed to low inflation deflators where WPI, which is used as one source, has been very low.
– In terms of GVA growth, the picture is as follows:
o Agriculture has grown by 1.4% which is encouraging as the monsoon was sub-normal and the kharif and rabi crops were affected.
o Mining growth of 7.1% is in line with accelerated business activity. This was also seen in case of electricity that grew by 7.5%.
o The turnaround in manufacturing is significant at 9.9%. two factors are at play here. The first is the negative base effect. The second is the higher profits that were recorded by the companies has added to the value added numbers.
o Construction received a boost to grow by 9.9% which was reflected in the housing sector doing well as also roads. Growth came over 9.4% last year.
o The services sector too was buoyant. Trade, hotels, transport etc. grew by 6.4% which is understated due to higher base effect of 12% last year. But tourism, recreation, hotels etc. did witness an upsurge due to pent up demand. Higher profits of companies in hospitality sector also contributed to this increase.
o The financial sector continued to do well and grew by 8.4% (9.1%). The banking sector had witnessed high growth in both deposits and credit last year which added to this buoyancy.
– More critically capital formation ratio was maintained at around 30.8%. this does show stability to an extent.
– Based on these numbers, we expect GDP growth for FY25 to be around 7.3-7.4% with the base effect pulling down the growth.
