Mind underlying worries in GDP growth estimate
The revised 7.3 per cent GDP growth estimate for 2023-24 comes as a positive surprise for the country. However, not everything about the advanced estimates released by the National Statistical Office (NSO) recently can be cheered. There are areas that continue to cause concern and the government does not seem to have a proper plan to fix them. The consumption story, for example, is far from rosy—household consumption growth is the lowest in two decades. NSO’s latest data says private final consumption expenditure is likely to grow at 4.4 percent in 2023-24, the lowest since 2003 barring the pandemic year of 2020-21. This means a stagnant jobs and income scenario, especially in rural India.
The drop in agricultural growth accentuates the rural slowdown. Add to this the higher rural inflation that has contributed to poor consumption in these areas over the past year. What is worse is that urban consumption is also feared to be slowing down due to high-interest rates and the RBI’s curb on unsecured lending. The government and the RBI hope that rural consumption will take off in the coming days because of lower gas prices, higher crop support prices and the extended free foodgrain programme. The government also hopes a hawkish central bank stance would further lessen the rural inflation burden.
Agricultural growth, which has fallen from 4 per cent in 2022-23 to 1.8 per cent in 2023-24, is another area of concern. In India, agricultural growth is mostly dependent on weather conditions—something that cannot be controlled or fully balanced by government intervention. Climate change concerns are growing and weather patterns are significantly changing. So, while some may brush aside the sluggish 2023-24 agricultural growth as a seasonal aberration, one must not forget the long-term impact of climate change on the sector.
The manufacturing sector’s gross value addition (in real terms), according to the advance estimates, is likely to grow at a healthy 6.5 per cent in 2023-24 against 1.3 per cent in the previous year. But its contribution to the real GDP in 2023-24 is likely to be 16.2 per cent, compared to 16.35 per cent in 2022-23 and 17.3 per cent in 2021-22. A lot of stress is being put on the manufacturing sector and the government hopes the sector would lead in the revival of private investment. However, the NSO’s latest numbers on manufacturing do not evoke that confidence.