India's FY24 GDP revision to 9.2% signals strong economic momentum, but growth faces high-base challenge

India's gross domestic product (GDP) for FY24 was revised up by 100 bps. At 9.2% YoY, FY24 recorded the highest growth in 12 years (except for post-COVID year). A significant upward revision in last year’s figures has raised the base for this year’s growth calculations. Growth at 6.2% in Q3 FY25, as against 9.5% last year, appears to be a decent growth. Thankfully, growth in private consumption (6.9%) and government spending (8.3%) were strong, which should send a strong signal to investors, who now have the appetite for investing as corporate profits remained strong in Q3. This should also boost the manufacturing sector, whose growth has remained modest (at 3.5% in Q3).

Despite the volatility in the global market during Oct-Dec quarter, exports performed considerably well at 10.4%. Notably, the third quarter of FY 2025 saw a prominent increase in exports of engineering goods, electronics items, drugs and pharmaceuticals, and inorganic chemicals—the highest-ever exports recorded in history. The depreciation in currency against the dollar probably boosted exports. On the other hand, imports have contracted for three subsequent quarters despite currency depreciation.

Consumer spending remained high, and with signs of becoming more broad-based. Strong agriculture output growth (5.6%) helped keep rural demand resilient. Key high-frequency indicators, such as GST (8.3%) and registration of vehicles (11.75%), show healthy spending activities. The total number of ITR filers has grown to over 9.05 crore, marking a 6.8% increase compared to the previous fiscal year, indicating more individuals moving into the middle- and high-income brackets. With the tax exemptions aimed at boosting the consumption of the middle class, we expect spending to remain strong in the quarters ahead.

The fiscal deficit till Q3FY2025 was 56.7% of the budget estimate. Government has propped up spending, with Government capex utilization taking a big leap in December 2024 when it grew 61.7% of budgeted capital expenditures, up from 46.2% until November 2024. This should further crowd in private capex. Strong consumption and government capex will boost overall investment activity in India.

The author is economist at Deloitte India. Views are personal.