India’s FY24 GDP growth could be within striking distance of 8%: SBI Ecowrap

India’s FY24 GDP growth could be within striking distance of 8 per cent even as the per capita GDP at current prices crossed ₹2 lakh mark in FY24 for the first time, says SBI’s economic research department.

Also read: Oct-Dec GDP growth surges to 8.4%, FY24 growth now pegs at 7.6%

“Defying all estimates, India’s economy grew by 8.4 per cent in Q3 FY24 after exhibiting more than 8 per cent growth in the preceding two quarters.

“For FY24 GDP growth is expected to increase by 7.6 per cent.We estimate Q4 (January-March) GDP growth at 5.9 per cent, which we believe is an understatement. Thus, it is most likely that FY24 GDP growth could be within striking distance of 8 per cent”. Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, said.

He observed that the third quarter GDP number jolted the psyche and cognitive framework of most in markets, while sweeping some by a pleasant surprise.

Ghosh noted that sharp revisions (both upward and downward) in both previous yearly as also quarterly numbers have meant FY22 and FY24 numbers have been revised upwards by 64 basis points (bps) and 26 bps, respectively, while for the current fiscal, both Q1 & Q2 numbers have been revised upwards by 40 bps and 44 bps, respectively, lifting YTD (year-to-date) GDP growth above 8 per cent mark.

Per capita GDP

The per capita GDP at current prices has increased 2.9 times from ₹72,000 in FY12. “It is interesting to note that in post-pandemic period (FY24 over FY22), there is a huge jump in per capita GDP (₹38,257 at current prices),” SBI’s ERD said in its “Ecowrap” report.

With the Government’s efforts to ensure quality of life for all citizens and stopping of leakage of benefits through Direct Benefit Transfer, the per capita GDP at current prices crossed ₹2 lakh mark in FY24 for the first time, it added.

Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, observed that in FY23, gross savings was at 30.2 per cent, and is supposed to cross 32.3 per cent in FY24, the highest since FY14.

“The household savings increased sharply during the pandemic period on account of sharp accretion in financial savings such as deposits. While household financial savings have since then moderated from 15.4 per cent in FY23 to 11 per cent in FY21. Savings in physical assets have grown sharply to 12.9 per cent in FY23 from 10.8 per cent in FY21,” he said.

Gross capital formation

The report noted that gross capital formation (GCF) by the government touched a high of 4.1 per cent of GDP in FY23, up from 3.6 per cent in FY20. This also had a domino effect on private sector investment that rose from 11 per cent to 11.9 per cent over the same period.

In fact, the trends in GCF to Gross Output ratio or the plough back of funds for creation of fresh capacity shows that for public administration, the ratio attained fresh peak in FY23 at 47.6 per cent owing to the emphasis on capital expenditure in recent budgets, per the ERD.

Also read: India’s GDP grows at 8.4% in Q3; economy to expand at 7.6% in FY24: Govt data

At the aggregate level, gross capital formation is supposed to have crossed 33.7 per cent in FY24, the highest level since FY19, it added.

Ghosh opined that even if investment and savings stay at the same level in FY25, with a declining ICOR (which measures additional unit of capital (investment) needed to produce additional unit of output, India could comfortably grow at 8 per cent in FY25.

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