What's New :
10th January 2024 (11 Topics)

Good growth, low demand: On the NSO projection


Growth appears to be sustained largely through government spending.

Sectoral Challenges in Economic Growth

  • Agriculture Slowdown: The first advance estimates reveal a slowdown in the agriculture sector, with growth at 1.8%, the slowest in eight years, raising concerns about the rural economy.
  • Services Conundrum: The trade, hotels, transport, communication, and broadcasting sector face a growth deceleration to 6.3%, highlighting the waning momentum in post-pandemic service sector recovery.
  • GVA Slowdown: Despite an overall GDP growth projection of 7.3%, the Gross Value Added (GVA) is expected to slow down to 6.9%, reflecting sector-specific challenges and loss of momentum.

Demand Dynamics and Consumption Challenges

  • Consumption Slowdown: Private final consumption expenditure is estimated to have its slowest non-pandemic year expansion in over two decades, growing at just 4.4%.
  • Rural Struggles: Weakness in farm output due to monsoon vagaries has hampered rural demand, impacting various consumer goods industries, including soaps, detergents, packaged foods, and two-wheelers.
  • Government Capital Spending: Gross fixed capital formation (GFCF), including government capital spending, remains a key driver of momentum, growing at 10.3% and reaching a record 34.9% share of GDP.

Policy Dilemma and Future Outlook:

  • Policymaker's Challenge: With the general election looming, policymakers face a dilemma between maintaining robust government spending to support growth, risking fiscal slippage, or tightening fiscal measures and risking further economic slowdown.
  • Fiscal Tightrope: The choice between keeping the spending spigot open and tightening the purse strings becomes crucial, determining the trajectory of economic growth amid political considerations.
  • Election Impact: The economic scenario adds complexity to policy decisions, as the government balances the need for growth stimulation with fiscal prudence in the run-up to the general election.
You must be logged in to get greater insights.

Verifying, please be patient.

Enquire Now