Riding high on the growth momentum

The challenge for India is to sustain growth in the 7% range, or possibly aim higher at achieving 8% growth, without losing out on its hard-won macro stability

The Indian economy's growth continues to surprise: The recently released advance estimate of Gross Domestic Product (GDP) by the National Statistical Office showed that the economy will grow 7.3% in the current fiscal year 2023-24, slightly higher than last year's 7.2% increase. The growth estimate was higher than Reserve Bank of India's forecast (7%) and consensus projections (6.7%). The number is likely to be revised over five more revisions spread across three years, but it serves as a useful early gauge of growth momentum, the source of growth, and broadly helps the Union ministry of finance in formulating its revenue and expenditure estimates ahead of the Union Budget in February.

What are the key takeaways from the latest release? Two economic developments are becoming increasingly evident and entrenched.

First, India's growth differential with the rest of the world has widened. India's growth rate has kept a 7% handle for the last two years, but the world's GDP growth has slowed.

The International Monetary Fund projects global growth slowed from 3.5% in 2022 to 3% in 2023 and is expected to remain subdued at 2.9% in 2024, below the historical (2000-19) average of 3.8%.