Why is the Q3 GDP surprise not surprising?
GDP growth print for 3Q contrasts the grim reality of household consumption and income situation. The latest national expenditure survey (2022-23), released after a lag of 11 years shows real consumption grew modestly at 3% over the past 11 years and the PLFS data indicates flat real incomes over the past four years. Also, most consumer companies have shown a lackluster demand situation.
What is not surprising is that the persisting discordance has accentuated in the 3Q print and reflects in a) the large contribution of the discrepancy component, b) a sharp rise in net indirect taxes translating into enlarged expenditure GDP, and c) a disproportionate decline in imports relative to the decline in consumption.
Importantly, the latest projection of nominal GDP for FY24 at INR 293.9 tn is a decline of 2.6% from the FY24 budget projection and -0.9% over the first advance estimate.
For the headlines, the 3QFY24 GDP at 8.4% YoY came in higher than CSO’s projection thereby prompting an upward revision in the second advance estimates (AE) for the full year FY24 at 7.6% YoY vs the 1st AE of 7.3% YoY (Jan’24).
But on a seasonally adjusted (sa) basis the real GDP rose modestly at 0.8% QoQ, implying an annualized growth of 3.1%. Putting together, the average QoQ rise during 1Q-3QFY24 at 1.7% translates into an annualized growth of 4.1%.
Core GDP (GDP ex discrepancy or the unaccounted portion) grew by 4.7% YoY, or just 55% of the headline GDP growth. Also, along with the 0.9% QoQ sa in 3Q, the annualized 1Q-3QFY24 growth in
