For the second time this year, the GDP print from the National Statistics Office (NSO) has sprung a surprise on forecasters. Real GDP growth for Q3 FY24 has been estimated at 8.4 per cent, well above not just market expectations of 6.6 per cent, but also Reserve Bank of India’s estimate of 6.5 per cent. With upward revisions in Q1 and Q2 numbers to 8.2 and 8.1 per cent, NSO now expects GDP growth for FY24 at 7.6 per cent against projections of 6.7-7 per cent.

Growth rates upwards of 7 per cent for the third year running, reaffirm India’s position as the go-to market for foreign investors in a sluggishly growing world. They also give the government greater leverage in its attempts to convince global rating agencies to upgrade its sovereign rating. Yet, it would be best not to make too much of the Q3 GDP growth of 8.4 per cent or the FY24 growth of 7.6 per cent. Third quarter GDP has received a significant helping hand from a 32 per cent jump in net indirect taxes (indirect taxes minus subsidies) overlaying moderate GVA (gross value added) growth of 6.5 per cent. As indirect tax collections in this period were not remarkable, the Centre staying its hand on subsidies — for unconnected reasons, one hopes — seems to have contributed to the jump. Normalisation of subsidies can play out now, perhaps why Q4 growth works out to just 5.9 per cent based on the annual projection.

Growth numbers this year have also received statistical help from downward revisions to previous year’s data, as the NSO replaced headline data used in its advance estimates with more representative data in revised estimates. FY23 GVA growth has been pegged down by 30 basis points to 6.7 per cent and real GDP growth by 20 basis points to 7 per cent, contributing to a favourable base effect for this year. FY22 growth has also been reworked from 9.1 to 9.7 per cent. These material changes suggest that first-cut GDP estimates always need to be read with caution. GVA for the first nine months of FY24 shows broad-basing of the acceleration in economic activity. Employment-generating sectors such as manufacturing and construction have reported a 10 per cent plus growth. Utilities and mining which power them, grew at 7.5 and 8.4 per cent respectively.

Services growth has moderated from a high base, but is still strong with trade, hotels and transport at 6.8 per cent and financial services, real estate at 8.6 per cent. Apart from a cloudy export outlook, agriculture remained the other dark spot growing at 1.2 per cent. But reports of a waning El Nino promise a rebound next fiscal. This may also hold the key to a revival in private consumption, which floundered at 3.7 per cent growth in the first nine months, while gross fixed capital formation raced at over 10 per cent. Overall, the numbers suggest that growth is chugging along well despite elevated interest rates. This offers headroom for the RBI to keep its eyes trained on inflation, for its rate-setting decisions in upcoming monetary policy reviews.