Feb 29 (Reuters) - India's economy (INGDPQ=ECI) , opens new tab rose 8.4% in the October-December period, the fastest pace seen in six quarters and beating all estimates, partly helped by a surge in manufacturing activity, according to data released by the government on Thursday.

The growth rate was much faster than economists' forecasts of 6.6% as seen in a Reuters poll, and higher than the revised growth of 8.1% in the previous quarter.

The manufacturing sector, which for the past decade has accounted for just 17% of Asia's third-largest economy, expanded 11.6% year-on-year in the December quarter, compared with a revised 14.4% in the previous three months.

The farm sector, which accounts for about 15% of the $3.7 trillion economy, contracted 0.8%, compared with 1.6% growth in the September quarter.

COMMENTARY

SUVODEEP RAKSHIT, SENIOR ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI

Real GDP growth in Q3 FY24 was much ahead of expectations at 8.4%. However, much of the upside surprise was from net taxes.

The underlying production growth reflected in GVA (gross value added) growth was closer to expectations at 6.5%. Broadly, GDP data indicated that investment growth continues to outpace consumption growth by a huge margin.

The household savings rate dipped in FY23, led by a lower financial savings rate compared with FY22. As expected, the physical savings rate increased marginally. For policy makers, the concern on growth will remain minimal for now with growth staying on a decently strong footing.

SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM

GDP growth surpassed expectations in Q3, coming above 8%. However, from the supply side, GVA growth was in line with expectations at 6.5%. This divergence is due to the strong tax growth in the quarter.

Broadly, the internals signal that agriculture growth remains weak, while manufacturing and services continue to push up growth.

The data revisions to full-year FY24 figures present a downside risk to our current FY25 forecast of 6.4%.

ADITI NAYAR, CHIEF ECONOMIST, ICRA LTD, GURUGRAM

The Q3 data on India's growth threw up a divergent trend, with the GVA growth moderating broadly on expected lines to 6.5% and the GDP expanding by a much higher-than-anticipated 8.4%.

This wide gap followed a surge in the growth of net indirect taxes to a six-quarter high of 32% in this quarter, which is unlikely to be sustainable. In our view, it may be more appropriate to look at the trend in the GVA growth to understand the underlying momentum of economic activity.

Investments emerged as the fastest growing component of GDP in Q3 FY2024 and displayed a mild sequential dip, contrary to the sharp slowdown seen in government capex.

Amid the sharp upside surprise in the headline GDP growth number, the contraction in the government's revenue expenditure and capital expenditure, as well as the slide in the core sector growth in January 2024, offer some sobering trends.

THAMASHI DE SILVA, ASSISTANT INDIA ECONOMIST, CAPITAL ECONOMICS, LONDON

Looking ahead, we expect economic activity to moderate over the coming quarters but it should still remain exceptionally strong, which will limit the need for policy loosening for a while.

The timelier activity data such as the flash PMI (purchasing managers' index) suggest that the economy has made a flying start to 2024 too. We think that momentum may fade a touch; household consumption is likely to moderate as a result of the tightening of restrictions on unsecured lending and the lacklustre global backdrop is likely to weigh further on exports.

That said, any slowdown in growth will be mild, particularly as the government's infrastructure drive is likely to prop up activity. This limits any immediate need for rate cuts. We think the Reserve Bank of India will only start easing policy in Q3 2024, much later than most other major emerging markets.

UPASNA BHARDWAJ, CHIEF ECONOMIST KOTAK MAHINDRA BANK, MUMBAI

The sharp upward revision to the GDP comes on the backdrop of downward revision to FY23 figures and stronger investment and net exports in FY24, but lagging consumption.

More intriguing is that gross value-added estimates for FY24 have been left unchanged, while GDP is sharply higher.

RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE

The real GDP posted a strong upside surprise at 8.4%, signalling that India continues to grow at a faster pace than regional and major economies, taking the fiscal year-to-date average for FY24 to above 8%.

Investment growth is on the driver's seat as a supply-driven push also helps the economy witness a non-inflationary recovery, while consumption grew at a moderate pace.

Risks to the outlook are mainly exogenous, with an unexpected worsening in the geopolitical situation as well as volatile commodity movements.

The robust growth report will likely reinforce the central bank's optimism on the outlook, reinforcing their preference to keep policy conditions tight.

https://www.reuters.com/world/india/view-indias-oct-dec-quarter-gdp-grows-84-government-data-shows-2024-02-29/