Despite the overall buoyancy in the GDP numbers, a cause for concern emerges in the tepid nominal GDP growth. The 8.9% nominal GDP growth for 2023-24 falls short by 1.6 percentage points compared to the 10.5% projected in the 2023-24 Union Budget. In absolute terms, the initial advanced estimates indicate a nominal GDP of ₹296.6 lakh crores, contrasting with the budgeted ₹301.8 lakh crore. This figure is pivotal as it forms the basis for tax collections, and any shortfall may elevate the fiscal deficit beyond government expectations.

The potential impact of this lower-than-anticipated nominal GDP on tax collections remains uncertain. It raises questions about whether this deviation is a consequence of deflationary factors or if it could genuinely impede tax revenues. Answers to these questions are expected when the Revised Estimate numbers for 2023-24 are disclosed in the Interim Budget on February 1. Notably, the economy may witness tailwinds, including elevated corporate profits, despite the nominal GDP discrepancy.

Analysts suggest that the rare coexistence of falling core inflation and rising GDP growth played a pivotal role in India’s robust macroeconomic performance in 2023. However, the trajectory for 2024 hinges significantly on the landing of commodity prices. Falling input prices have empowered producers to reduce output prices while maintaining heightened corporate profits. This delicate equilibrium contributed to India’s economic resilience in the preceding year.

The Union finance ministry, expressing optimism, stated, “The first advance estimates of FY24 show no let-up in growth momentum in the economy. Resilience and strength of the economy underpinned by reforms of the last nine years have laid the foundations for the economy to sustain a healthy growth rate in the coming years.” This assertion underscores the belief that the groundwork laid by reforms in recent years positions the economy for sustained growth, despite the nuanced challenges presented by nominal GDP fluctuations.

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