The real gross domestic product (GDP) growth rate for October-December 2023 was 8.4%, according to data released by the Government of India on February 29th. The service sector played a supportive role, achieving positive growth for 13 consecutive quarters. However, topics such as the slow revitalization of the manufacturing sector remain.
The GDP growth rate for July-September 2023, previously announced by the Indian government as 7.6%, has been revised to 8.1%, while the growth rate for April-June 2023 has been revised to 8.2% from 7.8%. The growth rate for October-December 2023 exceeded that of the previous two quarters.
Looking at the growth rate of real gross value added (GVA), which is the accumulation of value added by industry, by sector, the growth rate of financial and real estate services was 7.0%, and that of trade, hotels, and communications-related was 6.7%. The services sector, which accounts for a relatively high proportion of GVA, performed strongly.
Government spending grew at 7.8 percent. This is down from the previous two quarters when the growth rate reached 9-10%. India’s finance ministry had said in September 2023 that the target of reducing the fiscal deficit for 2023 was on track. It appears to have reduced spending on large infrastructure projects after October.
The Indian government’s forecast said that the growth rate for FY2023 (April 2023 to March 2024) would be 7.6%, the highest among major countries. Earlier the forecast had been 7.3%, which has been revised upwards. India will hold a five-year general election by May, and a higher economic growth rate will be an east wind for Modi, who is aiming for a second term.
India’s population has surpassed that of China to become the largest in the world and is expected to increase by the mid-1960s. Huge domestic demand is the driving force behind economic growth.
In November 2023, a commercial facility owned by Reliance Industries, a major Indian plutocrat, opened in Mumbai. Luxury branded stores are lined up, attracting the affluent.
New car sales in India exceeded 5 million units in 2023, higher than in Japan for the second consecutive year. Suzuki plans to increase its annual four-wheeler production capacity in India to 4 million units by FY2030, to about double the current level. There is even a perception that “India will become the world’s number one automobile production center by 2029” (Gadkari, India’s Transport Minister).
While India is aiming for economic growth led by manufacturing, World Bank data shows that manufacturing will account for only 13.3% of India’s GDP in 2022. This is lower than China (27.7%) and Vietnam (24.8%).
After coming to power in 2014, the Modi government came up with the industrial revitalization policy “Make In India”. The original plan was to increase the share of manufacturing in GDP to 25% by 2022, but this plan has not been realized.
Although India’s manufacturing GVA growth rate announced on February 29 was as high as 11.6%, but the overall contribution is small.
India has withdrawn from the Regional Comprehensive Economic Partnership (RCEP) agreement in East Asia.Sunil Kumar Sinha of India Ratings and Research pointed out that “India’s manufacturing sector has little competitive advantage, leading to loss of opportunities.”