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India’s gross domestic product (GDP) saw a significant rise of 8.4% in the October-December quarter (Q3)*, surpassing economists’ forecasts by far. The growth was driven by strong performance in manufacturing and construction sectors.
This growth exceeded a Reuters poll of economists’ average prediction of 6.6%. ICRA, a credit rating firm, had anticipated an even slower growth rate of 6% for the third quarter.
Marking the highest growth in six quarters, the Q3 GDP benefited from an 11.6% increase in manufacturing output and a 9.5% growth in construction, according to a government statement.
Following the strong number, the Indian government has also increased its GDP growth estimate for the fiscal year ending March 2024 to 7.6%, up from the 7.3% predicted in January.
Growth rates for the previous two quarters were also adjusted upwards: from 7.8% to 8.2% for April-June and from 7.6% to 8.1% for July-September.
India “easily” fastest growing economy of the world
“If you look at the GDP numbers … India’s poised for about 8% growth this year, that makes India easily the fastest growing economy in the world,” Krishnamurthy Subramanian, executive director at the IMF and former chief economic advisor of India, told CNBC. He attributed the acceleration in India’s economic growth to the government’s strategic emphasis on boosting capital expenditure, which has seen a substantial rise in recent years.
Prime Minister Narendra Modi, who is running for a historic third consecutive term in the upcoming national election, asserted his government’s efforts to bring fast economic growth to develop India.
The better-than-expected Q3 GDP growth should give Modi and his Bharatiya Janata Party (BJP) another boost. Economic challenges, including unemployment and inflation, are major points of contention in the opposition’s strategy in criticising the Modi administration.
*Note: India’s fiscal year runs from April-March.
