Budget 2024: Can Indian growth surprise again next year?

The statistics ministry’s first advance estimate of GDP growth for the current financial year is 7.3 percent.

It will not be an understatement to say the Indian economy's performance in 2023-24 has been a positive surprise. After clocking a growth rate of 7.2 percent in 2022-23, the world's fastest growing large economy was expected to slow down this year, with even the government and the Reserve Bank of India's (RBI) start-of-the-year forecasts of 6.5 percent seen as rather optimistic.

However, such has been the pace of growth that the Indian central bank was, in December 2023, forced to raise its prediction to 7 percent. Less than a month later, the statistics ministry's first advance estimate of pegged the current year's GDP growth rate at 7.3 percent.

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Sure, this is only an advance estimate and additional data could result in the number being lowered in the coming months. But it is difficult to deny that growth momentum is strong. The question to now ask is whether growth can improve further next year. The consensus, as was the case at the start of 2023-24, is no.

"Growth estimates for this fiscal have surpassed our expectations," CRISIL economists said in a note on January 5.

"Nevertheless, the first advance estimates bake in a slowdown in the second half relative to the first half of this fiscal," they further said, adding that they expect the "slowdown to continue next fiscal" due to a variety of factors, including slowing global growth, the impact of higher interest rates and fiscal consolidation, fading away of pent-up demand, and global geopolitical uncertainty.

"Persisting unrest in the Middle East is a risk to global trade flows and commodity prices. Rising crude oil prices can particularly disrupt India's growth," CRISIL said.

All good points. But credit where its due and we will let the RBI have the last word. Speaking at the World Economic Forum in Davos on January 17, Governor Shaktikanta Das said India is likely to grow 7 percent in 2024-25. Given Das' recent track record of getting growth surprises right, one would question the central bank chief's optimism at their own risk.