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00:00Hello and welcome. You're watching The Big Story on NDTV Profits. This is a special show
00:11on the GDP numbers that will be released very shortly. I'm in conversation with Dharmakirti
00:17Joshi, Chief Economist at Crystal and Radhika Rao from DBS. Thank you so very much to both
00:24of you for taking time out for us today. So, Radhika, I'll start with you first. What are
00:31your expectations on the numbers? They should be coming out just about any moment now. And
00:40what is your expectation from the headline number for the full fiscal year as well as
00:44for quarter four? Hi Pallavi, thank you so much for this opportunity. So, I think the
00:51growth number that we expect in Q4 is going to be around 7%. This is for the real GDP.
00:57And what we expect behind that 7% is non-farm output essentially helping growth, you know,
01:03generally on the expenditure side. So, we're going to see industrial growth. I think it's
01:08going to moderate a bit from the quarter before, but nonetheless, it's going to be still strong
01:13and then you've got services. So, the real GDP growth has come in at 8.2% for FY24. That is
01:26significantly or at least marginally above estimates. And real GVA growth has come in at
01:347.2% for FY24. GDP growth compares to a figure of 7% for FY23. This happens to be I think the
01:46third straight year that India's GDP has been in excess of 7% or in line with 7%. GVA growth too,
01:56very strong at 7.2% for FY24. For Q4, real GVA and real GDP have been estimated to grow by 6.3%
02:08and by 7.8% respectively. That's again higher than estimates. So, Radhika, I'll quickly come
02:16back to you. Key takeaways. Once again, a set of numbers that have surprised on the upside.
02:22Yeah, certainly, Balvi. I think this has become quite a trend.
02:25Absolutely.
02:27Better than market expectations, better than consensus, better than the most optimistic
02:31forecast out there. That's true. We'll be keen to see what's underlying. But I think on the annual
02:35year basis, it's pretty much in line with what we were expecting, which is at about 8%. So,
02:40the actual seems to have come about 8.2% for the real GDP. And the gap between real GDP and GVA was
02:46supposed to be in place because of the tax payouts as well as the lower subsidy distribution.
02:52Disbursements. So, that gap has been quite wide. And we had noted last time that it's in many
02:56quarters that you're actually seeing this kind of a wide bench. I think it showed up first in the
03:03Q3 fiscal 24 number when we saw it last October, December number. So, not surprisingly, that's
03:11obviously influenced the whole year as well. Seems to have also played its part in the fourth
03:16quarter of fiscal 24. But I think there'll be some election impact, early part of the election
03:21impact also filtering through the last quarter of the previous fiscal year. So, we'll wait and
03:27see how that's impacted some of the sub-components. But overall, I think a very strong number I think
03:32continues to show that India's growth is among better than most of the major economies in the
03:39world, certainly finishing fiscal 24 on a very strong note. Absolutely. And before we go to Mr.
03:47DK Joshi, I'll also quickly go through the quarterly estimates. And this time around,
03:53we actually have industry-wise breakups as well for the primary sector, secondary sector and
03:59tertiary sector. Let's quickly go through what that's looking like. Agricultural GVA has come in
04:05at 0.6%, I would say fairly in line with expectations. We were not expecting a strong
04:13figure there. Mining and quarrying has come in at 4.3%, that is actually lower than 7.5% that we
04:22saw in Q3. Coming to the secondary sector on an aggregate, it's grown by 8.8%. Again, a scorching
04:31number there led by manufacturing, which is coming at 8.9%. Whereas electricity and utilities have
04:41come in at 7.7%. And construction has come in at 8.7%. So that's a great set of numbers in the
04:51secondary sector. In the tertiary sector, that's grown by 6.7%. With trade hotels, transport
04:59communication having grown by 5.1%. Financial, real estate and professional services having
05:05grown by 7.6%. And public administration having grown by 7.8%. So at least in terms of trends,
05:14we did expect agricultural GVA to underperform in Q4 and the secondary sector and the tertiary
05:23sector to lead growth. That's pretty much in line with what's happened. But clearly, the standout
05:29here is the secondary sector, manufacturing as well as construction, having grown at about both
05:37at well over 8.5% actually. I'll quickly come to you, Mr. Joshi, what's your quick takeaway and
05:44your early thoughts looking at these figures? Well, the direction is on expected lines,
05:52but the growth came stronger than we had expected. So I think to note that the non-agricultural
05:59economy has been extremely resilient and extremely resilient to global shocks. Agriculture was a
06:06monsoon related shock and agriculture growth was supposed to be low this year. And I think that's
06:11what it came. But I think the story is the non-agriculture side of GDP. And I think some
06:17indications were there that the fourth quarter is going to be strong because the PMIs for
06:23manufacturing, PMI even for services was reasonably strong. So I think this is basically
06:31confirming the resilience of the economy. And by the way, if you look at the first advance
06:37estimates, second advance estimates, and now these numbers, I think every time I think the revision
06:43has been to the upside. And so the GDP continues to surprise positively.
06:50All right. Okay. Agri GVA, a little bit of a sore figure, especially given how secondary and
06:56the services sector have panned out. Can we expect, so far looking that we are expecting
07:04normal southwest monsoons, can we expect a little bit of a turnaround in Agri GVA going forward
07:11for the ongoing fiscal? Radhika? Yes. I think the outlook wise, there are some things that are
07:19certainly falling into place and some parts that are not. I think the early part of fiscal 25,
07:25we are still in midst of heatwave that's affected quite parts of the country, I think off late
07:33north and northwest. So that I think impact will show in perhaps the first part of fiscal 25.
07:40But outlook wise, I think one can be very optimistic. We are seeing conditions evolve
07:45for El Nino to be dissipating, Ladina to be setting in. The IMD has already spoken about
07:52expectations of a normal monsoon, and you already seen the early showers in place.
07:56So certainly very encouraging. As monsoon onset, you and I would be of course tracking
08:02how the spread is, because some of the months in the southwest monsoon are more important than the
08:07others. So we need to see if those months, you know, the boxes are ticked. And then you also have
08:12which regions are getting how much rain through these next three, four months. So that will become
08:17important overall to gauge the requirement. And it's very necessary, because if you see the reservoir
08:22levels, and groundwater levels, they are below where they were at the same time last year.
08:27Certain parts of the country, the shortfall is even higher. So that's why so much more attention
08:32on monsoon this year than otherwise. And I think it's made its way also into the RBI's comments,
08:37for example, who have been talking about climate change as a potential problem for food price
08:43outlook going forward. But a better fairing monsoon means, you know, better crop output also
08:49by extension would mean better rural incomes, because we had seen rural demand actually begin
08:55to come back in the late part of calendar year 24, and calendar year 23, and early part of calendar
09:02year 24. So certainly a good multiplier effects if agri output holds up this year.
09:09All right. Okay. And coming to expenditure wise trends, private consumptions actually come in
09:15at about 4%, while government final consumption expenditure is at about a percent,
09:23while CAPEX is at six and a half percent. Mr. Joshi, your takeaways on that. Private
09:28consumptions, of course, been a little bit of an Achilles heel in FY24 for India's economy.
09:35Is this figure in line with expectations? Are we expecting signs of improvement going forward?
09:42Well, I think, so this 4%, I'm presuming you are giving the full fiscal year number because the
09:48quarter. Yeah, quarter number. Okay. Because what is the full fiscal year number? Because the
09:55earlier number was around 3%. Yeah, we do expect private consumption to improve in 24, 25.
10:03And I think the reason for that is, one is the rural side of the economy will do well,
10:09I think as Radhika was pointing out. And agriculture will actually surprise because
10:13it's grown much below the trend in 23, 24. So you will get a base effect and you will get a
10:20monsoon effect. So both of them actually will, can actually, agriculture GDP can be easily 6% to 7%
10:27if monsoons play out well in terms of the quantum of rain, in terms of its distribution, regional,
10:33as well as over time. And I think the consumption part, particularly in the rural area will get a
10:42lift as a result of this. Urban consumption, I think will be somewhat slower in 24, 25,
10:50because the urban consumption gets hit by the interest rates. I mean,
10:55rural doesn't get hit that much by the interest rates because of the credit penetration.
10:59So I would say that, yeah, I think overall consumption will still hold, but that said,
11:06investments will continue to be the driver of growth even in 24, 25.
11:12Okay. All right. Radhika, coming to capital formation, about 6.5% growth there for Q4.
11:20And of course, one interesting trend Mr. Joshi pointed to was the fact that in FY25,
11:29you know, we could see things working out the other way with rural possibly picking up some
11:34of the slack from urban consumption. Is that in agreement with how you look at it as well?
11:40And also at 6.5%, can we now, you know, we have more reasons to believe given recent trends in
11:47CAPEX that private CAPEX is finally picking up. Is that the sort of right way to look at it?
11:54You know, on the year, of course, the quarterly number, like you rightly mentioned about 6.5%,
11:59but if you take the entire fiscal year, I think the broader trend that all of us are paying
12:04attention to is that CAPEX is, you know, our investment growth is certainly growing at a
12:09much faster pace than consumption. Now, this kind of cycle had happened, you know,
12:15probably 2004, 2006, that kind of phase where you had seen a sustained increase in the investment
12:22growth, you know, compared to consumption. I think that's repeating itself. I would think that would
12:27also go ahead and, you know, extend into fiscal 25 as well. But if you look at the drivers behind
12:33this CAPEX growth, certainly what is important is what the government is doing. I think the
12:37centre has already allocated quite a substantial amount, I mean, 25% growth in the last couple of
12:44years, and then you've got more in the year fiscal 25 interim budget. When the final one is laid,
12:49you will, I would personally expect similar numbers to be maintained, you know, in terms
12:53of being more CAPEX heavy. Then you also got the states which are working alongside. Apart from
12:59just the public sector, you also have household CAPEX that's really picked up. And I think, again,
13:04that is quite encouraging, because it means real estate and construction. Construction also being
13:08a quite a labour intensive industry would have positive multiplier effects for the economy.
13:15So the household CAPEX as well as the government CAPEX certainly working in cohesion.
13:19Private corporate, you know, in our conversations with companies, it certainly seems to be that
13:25they're contemplating putting in fresh money, but they really need to see some more things fall into
13:30place. So they haven't really gone big on that front, barring sectors, you know, which are very
13:36closely related to what the government is doing. So for instance, and so all of this is just the
13:41regular, you know, cycles, and then you've got, of course, the elections. So for instance, if you
13:45see some of the infra related firms, they did have a good pipeline, but it moderated somewhat in the
13:52fourth quarter of fiscal 24, just ahead of the election. So I think you will see that again,
13:56happen in this quarter as well, before it really takes off. So early part of the year, somewhat
14:02impacted by the election cycle. But once the results are out, you know, we're going to see
14:08some of that come back. So CAPEX, it's a bit still private, non partly private, mostly public sector,
14:15but private corporate, I think it's still to participate fully. But one can hope that, as Mr.
14:22DK mentioned, if consumption fares better, then there'll be one more factor that could draw in
14:28the corporate sector, which is at a very healthy, you know, healthy position at this point,
14:33as insofar as its own books are concerned. Right. Okay. Mr. Joshi, coming to you a couple of things,
14:40you were talking about the full year trends for private consumption, that's also coming at about
14:464%. While CAPEX, I mean, broadly, these figures do seem to be in line with what we've seen for
14:54quarterly figures. CAPEX, private CAPEX has come in at about 8%, the capital formation bit, private
15:03consumption at 4% and government expenditure lagging compared to both of these. Quick thoughts
15:10on those. And I also do want to ask you about the GDP GVA divergence that we continue to see
15:18in quarter four. We were, I believe, expecting, you know, the divergence to have narrowed
15:25in quarter four, considering the subsidy outgo was lower. What are you reading into the GDP GVA
15:33divergence? Also, the fact that while GDP growth is 8% plus, and GVA growth is clearly below that
15:42by a fair amount. Does that have to sort of be kept in mind when we're reading the GDP figure
15:48and when we're trying to understand what really the state of the economy is from these figures?
15:54Well, I think, first of all, we have decided now, I think that we will work with GDP numbers.
16:01But GVA also gets released. And I think earlier we used to focus more on GVA. It is regarded as a
16:08more firm estimate. But having decided that we focus on GDP, so I think we should be looking
16:12more at GDP. Now, the discrepancy is because of the net taxes, I think, which will correct,
16:21I think, in 2024-25. So you see some kind of convergence between GDP growth and GVA growth
16:27happening in the coming year. So I would still focus on the overall GDP number. And I think,
16:35in addition to that, I think there are also deflators at play. I mean, the manufacturing,
16:39high manufacturing growth is also a result of extremely weak deflator in that because the WPI
16:45inflation was, which has a higher weight in the deflator, was almost close to zero. So I think
16:51there are several factors which are creating some sort of divergence. But I think going back
16:57to your previous question of investment, I think here we see private investments very gradually
17:07pick up. And I think there is a dichotomy within private investments also, as Radhika was pointing
17:12out. The steel cement segments, which are directly linked to what government is doing, they are very
17:18strong. But in addition to that, I think there are newer segments in private capex which are
17:23coming up, which will increasingly play a bigger role in the private industrial capex story going
17:30ahead, which is electronics, semiconductors, electric vehicles. I think this is where the
17:35interest is. And the next sector which will see action from the private capex side is going to be
17:42the auto sector. I think there is a lot of capex lined up there. So I would say that it's going to
17:49be a cautious pickup in capex, unlike the capex pickup we saw after the global financial crisis,
17:56or even before the global financial crisis, which actually later on turned out to be,
18:01there was a lot of froth in that investment and we got a lot of NPAs out of that. So this is not
18:08playing out this time and because of the IBC and NCLT, it's more genuine capex, that's what I would
18:19say. So I would believe that the gradual lift in private corporate capex will continue. So far,
18:27I think the higher role has been played by government capex and household capex. Government
18:34will continue to play a role even in 24-25, maybe higher than what they had indicated in the
18:42interim budget, because now they have more fiscal leeway because of this dividend, 2.1 trillion
18:49rupees dividend transfer from the government, which gives them somewhat enhanced ability to
18:56focus on capex going ahead. So we could see the overall capex continue to strengthen even in 24-25.
19:04Okay, all right. So gross capital formation did actually come in at 8.9%, almost 9% actually,
19:12for the full fiscal year while private consumption was in line with what we saw for the quarter,
19:17both at about 4%. I do want to understand your perspective as well on the GDP GVA divergence
19:25and what you make of the divergence and if we can expect the divergence to narrow going forward.
19:31Yeah, I think I'll just, you know, I think Mr. Joshi largely spoke about that gap,
19:39which is a function of taxes and subsidies. So they routinely are affected by a few things,
19:44you know, sometimes towards the end of the year, you see subsidies being, you know,
19:49allocated at a faster pace. This time around, I think on the taxation front, certainly,
19:53as you've been seeing in the trickle of news in the past few weeks, the taxation collections,
19:59direct tax collections, indirect tax collections, as well as, you know, one-off non-tax revenue
20:05sources, like the RBI's transfer of surplus has left the government with a very good revenue
20:10buffer. So sometimes these things can distort, you know, what the real GDP looks like, but we
20:16would also think that this doesn't usually last beyond two, three quarters. So we would expect a
20:21convergence of sorts going into fiscal 25. So, you know, and usually, when we have seen a long-term
20:30average, it's about 20 or 30 basis point gap between the GV and GDP. So certainly, this is
20:34much wider than that, and we wouldn't think this would last for too long. But going into the
20:40expenditure, you know, components, it will be very important to see again, that for instance,
20:44we did discuss the capex and consumption part, but what's happening to trade as well, because,
20:50you know, after a long time, we used to be, we used to discuss a lot on the goods and goods trade
20:55deficit in India's case, but services have become a very big force to reckon with. In fact, the
21:01services trade surplus has continued to hit record highs and helping to a great extent to offset
21:07what's happening on the goods side. So what advantage that carries is that you're going to see
21:13trade in general being a lesser of a drag on the growth metrics, right? Usually we used to have net
21:18exports being eroding or taking away from growth or a negative contributor, so to speak. But you're
21:25going to see that turn positive over the next couple of years because of the, you know, again,
21:29the manufacturing footprint, improving the improving composition of goods exports as well.
21:35We have seen petroleum shipments, chemicals, drugs, and pharma plus electronics become a much bigger
21:42part of the pie than say five years back. So I would think the composition will pretty much go
21:48back to or the discussion pretty much go back to what's driving growth from the expenditure end as
21:54obviously equally important as what's happening on the supply side. But we're hopeful that, you know,
22:00going forward, the outlook wise, you've got global growth is in fact looking a bit better than it did
22:07late last year. You know, China is expected to grow at a bit of faster pace. U.S. growth is
22:11two and a half percent. Europe is also finally coming out of its stagnation.
22:15So domestically and globally, we would think there are reasons to be a lot more optimistic.
22:22Okay. All right. So broadly continuing with that, Mr. Joshi, also given that we've recently received
22:28the RBI's projection for FY25, yet another year of about seven or seven plus percent growth.
22:36And looking at recent high frequency indicators, we've also seen core sector data coming at 6.2
22:43percent for the month of April. Safe to say economic momentum seems to be carried forward
22:51on a sequential basis. It continues to remain strong and resilient. Would that be the right
22:56takeaway? Yeah, I think the data that we have seen for April and May, I think for May it is
23:03only PMIs. I think that's indicating a very strong momentum. And tax collections have been
23:11very healthy for the month of April and that GST collection that may continue in the month of May
23:18as well. But I think I should also mention that if you look at the budgetary projections on taxes,
23:26the growth is much slower than what we achieved in 24-25. So there is going to be some, I think,
23:32moderation in growth, which is consistent with our projection that growth will moderate
23:38in 24-25 from the levels that it has seen in 23-24. Our existing forecast is 6.8
23:48percent for 24-25. And I think the two factors which are pulling it down, one is the central
23:56bank raises interest rates to slow the economy. And I think now the peak impact will be felt
24:01and rate cuts are not going to happen anytime soon. And then I think the fiscal impulse is
24:06also somewhat lower than what it was in 24-25. So we will see some impact of that.
24:13And as Radhika was pointing out, I am actually quite hopeful on the trade front, particularly
24:19the goods trade, because global trade cycle is, in volume terms, is also expected to pick up. I
24:24mean, the World Trade Organization is talking about a pretty sharp increase in manufacturing
24:30trade. The supply chain data which S&P collates is also telling you that the supply chains globally
24:36are operating at near full capacity, which is good for the manufacturing activity. So I think
24:42there are indications that two things are happening here. One, the global growth remaining
24:48resilient. And on top of that, it's in trade intensity of growth is expected to, goods trade
24:53intensity is expected to rise. So I think you will get some support from exports as well in 24-25.
25:02So overall, I think even, I mean, if you go by 6.8 percent, which is our projection,
25:08that's a very high rate of growth, I think, over a very high base.
25:14And before we close the discussion, we do have to touch upon the FY24 fiscal deficit
25:21as well. That seems to have come in at about 5.6 percent of the GDP. So the government's revised
25:28fiscal deficit target for FY24 was actually set at 5.8 percent, and there were expectations that
25:34we might actually perform better than that. So this figure is not entirely a surprise,
25:39but Radhika, quick closing thoughts on the fiscal deficit figure, and clearly yet another sort of
25:47piece of good news as we wrap up the day and the discussion, right? What are you making of that?
25:53And do you think that can possibly have implications on the government's fiscal
25:58target for the ongoing fiscal year as well when we see the next budget? Will the government,
26:05especially given that the finance minister has said that the outlook change by S&P has been
26:11encouraging, we do know that the government has been focusing on fiscal consolidation,
26:16all of these factors taken together, what are we looking at in terms of fiscal consolidation?
26:21Will it be quicker than was earlier anticipated? I think that's quite interesting because in the
26:27past, if you remember, when we used to talk about fiscal consolidation, it usually used to be a
26:32result of pullback in expenditure towards the tail end of the year. But you do know when you
26:37look at the capex numbers of capital expenditure from the government, high frequency, it showed
26:42that even in the final quarter of the year, the expenditure was still ongoing. So it's encouraging
26:49that it's coming from higher revenue generation and not so much expenditure pullback in fiscal
26:5424. So from that angle, as well as a robust nominal GDP number, it's encouraging that it's
26:59come out about 5.6%, as you rightly pointed out. Now going into 25, we're really on a stronger
27:06footing. Again, as revenues are concerned, there is a buffer of at least 0.3, 0.4% of GDP insofar
27:14as additional revenues are concerned. Interim budget, I think the revenue tax projections
27:19were, as they have been of late, quite conservative. Buoyancy of about one is
27:24considered. So I think there is a quite a likelihood that we are going to get at some 5%
27:30in fiscal 25. And S&P has already acknowledged that. So we would think faster consolidation
27:37certainly ahead of us. Okay, great. Thank you so much for that. With that, we're completely out of
27:42time. But once again, Mr. DK Joshi and Radhika, thank you so much for taking time out for us.
27:49Stay tuned to NDTV Profit for our continuing coverage on today's GDP figures,
27:54fiscal deficit figures and a lot more. We have more coming up for you on the other side.