India's GDP At 1-Year High, Grows To 7.8% In Q1FY24; Here's What Drives The Economy

India's gross domestic product (GDP) expanded to 7.80% in the first quarter of FY24, surpassing market expectations of 7.7% slightly. The growth is driven by services sector coupled with consumer demand and a rise in government capital expenditure. Meanwhile, gross value added (GVA) at basic prices came in at 7.8% in the first quarter, as against 11.9% a year ago same period.

However, the latest growth rate is slower than the GDP rate of 13.1% witnessed in Q1 of the previous fiscal. Real GDP registered a growth of 7.2% in FY23 compared to a growth of 9.1% in FY22. For the fourth quarter of FY23, the growth was higher than expected at 6.1%, while GVA witnessed a growth of 6.5%.

As per the National Statistical Office (NSO), India's real GDP or GDP at Constant (2011-12) Prices in Q1 2023-24 is estimated to attain a level of ₹ 40.37 lakh crore, as against ₹ 37.44 lakh crore in Q1 2022-23, showing a growth of 7.8 per cent as compared to 13.1 per cent in Q1 2022-23.

India's economic growth was at 7.8% in the April-June quarter, marking the fastest annual pace in a year and slightly surpassing market expectations of a 7.7 per cent expansion, as per Trading Economics data. The robust performance of the service sector was the main driver of GDP growth, accompanied by strong consumer demand and increased government capital expenditure.

Further, the nominal GDP at Current Prices in Q1 2023-24 is estimated at ₹ 70.67 lakh crore, as against ₹ 65.42 lakh crore in Q1 2022-23, showing a growth of 8.0 per cent as compared to 27.7 per cent in Q1 2022-23.

Also, the real GDP growth of Q1 missed RBI's estimate of 8% for the first quarter of FY24.

Further, in Q1FY24, agriculture, forestry and fishing recorded a growth rate of 3.5%, expanding from 2.4% in Q1FY23. However, mining and quarrying growth stood at 5.8%, lower than growth of 9.5% in Q1 of the previous fiscal. Similarly, manufacturing growth slowed to 4.7% in Q1FY24 versus 6.1% in Q1FY23.

A major slowdown was seen in the growth rate of electricity gas, water supply & other utility services to 2.9% in Q1FY24 versus 14.9% in Q1FY23. The growth rate of the construction sector also stood at 7.9% versus 16% in Q1FY23. Additionally, the growth rate of trade, hotels, transport, communication & services related to broadcasting, came in at 9.2% in Q1FY24 compared to 25.7% in Q1FY23. Also, public administration, defence and other services saw a growth rate of 7.9% versus 21.3% in Q1 of FY23.

However, financial, real estate and professional services recorded growth of 12.2% in Q1FY24, shooting up from 8.5% in the same quarter a year ago.

Quarterly Estimates of GDP are indicator-based and are compiled using the benchmark-indicator method, i.e., quarterly estimates available for the previous year referred to as the benchmark year are extrapolated using the relevant indicators reflecting the performance of sectors. Data sourced from various Ministries/ Departments/ Private Agencies serve as valuable inputs in the compilation of these estimates.

The sector-wise estimates have been compiled using indicators like (i) Index of Industrial Production (IIP), (ii) Financial performance of listed companies in the Private Corporate Sector based on available quarterly financial results for these companies, (iii) Crop Production Targets for 2023-24, (iv) Production Targets for Major Livestock Products for 2023-24, (v) Fish Production, (vi) Production/ Consumption of Cement and Steel, (vii) Net Tonne Kilometres and Passenger Kilometres for Railways, (viii) Passenger and Cargo traffic handled by Civil Aviation, (ix) Cargo traffic handled at Major and Minor Sea Ports, (x) Sales of Commercial Vehicles, (xi) Bank Deposits and Credits, (xii) Accounts of Central and State Governments, etc., available for Q1 2023-24.

The next release of quarterly GDP estimates for the quarter July-September, 2023 (Q2 2023-24) will be on November 30, 2023.

For the full year 2023-24 fiscal, RBI expects GDP growth to be at 6.5%.