Reality behind the 8.2% FY24 GDP growth is not as robust
real GDP growth print at 7.8% YoY came higher than implied in CSO’s advance estimate for the full year of FY24 at 7.3%. As a result, the average growth for FY24 stands much higher at 8.2%. While it reflects a modest deceleration from 3QFY24 at 8.6%, the average second-half growth of 8.2% is unchanged over the first half. Also, it gives an impression of a decisive turnaround from the 2HFY23 downturn and an FY23 average of 7%.
However, the surprise part remains limited to the headline numbers. The headline growth appears misleading given the underlying situation.
Here are some observations:
First, the real Gross Value Added (GVA or output GDP) growth slowed considerably in 4QFY24 to 6.3% from 8.3% in 1QFY24. Since the GVA side is highly correlated with the value added of the organized sector, the peak out of the margin expansion cycle and a sharp deceleration in operating profit growth of the corporate sector are weighing on the output GDP growth. Hence, the earlier sharp divergence between high real GVA growth and low core GDP growth is now narrowing. However, the full-year average GVA growth at 7.3% in FY24 is much lower than the headline expenditure GDP growth of 8.2%.
Second, the core GDP growth (GDP ex discrepancies) for the full year FY24 has averaged 3.8%, significantly lower than 7.1% in FY23. Since the discrepancy element is highly correlated with the GDP deflator used to derive real GDP from nominal GDP, it has created a statistical divergence between the GDP growth and the underlying demand situation.
