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Laborers work at a construction site in Mumbai in November 2023.
London
cnn
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The world’s fastest growing major economy is living up to its billing.
India’s gross domestic product increased by 8.4% in the last three months of 2023 compared to the previous year, against a growth of 7.6% in the period from June to September, according to the country’s statistics office saying Thursday.
The latest increase is much stronger than analysts expected and means India’s economy “ended last year with a bang,” Thamashi De Silva, assistant India economist at Capital Economics, wrote in a note.
“This growth rate was the strongest among the main economies last quarter,” he said, also noting that in 2023 as a whole, GDP grew by 7.7%. More timely data on business activity suggests that “the economy is also off to a good start in 2024,” she added.
The data will further reinforce optimism about the economic prospects of the world’s most populous nation. According to a separate report on Wednesday by property consultancy Knight Frank, the number of ultra-wealthy Indians (those with a net worth of at least $30 million) will increase by 50% in the five years to 2028, the largest increase globally.
He International Monetary Fund India’s economy is expected to expand 6.5% in 2024, compared with 4.6% in China, where growth has slowed due to a series of challenges, including a housing crisis, record youth unemployment and pessimistic consumers. China’s leaders are expected to reveal their 2024 growth target next week.
Sustained expansion will quickly propel India up the ranks of the world’s largest economies. Jefferies analysts expect the country to become the world’s third-largest economy by 2027, up from fifth today.
India is also widely seen as an alternative to China for countries and companies looking to diversify their supply chains, particularly as the relationship between Washington and Beijing deteriorates.
Prime Minister Narendra Modi’s government has been actively courting big companies to set up factories in the country, while spending billions to improve roads, ports, airports and railways.
Some of the world’s largest companies, including Apple supplier Foxconn, are already expanding operations there. and tesla (TSLA) CEO Elon Musk said last June that his company was seeks to invest in India “as soon as humanly possible.”
“(Modi) really cares about India because he is pushing us to make significant investments in India, which is something we intend to do.” Musk told reporters.
De Silva of Capital Economics said the momentum behind India’s red-hot economic growth “may fade a bit” as weak global growth weighs on exports, while tighter restrictions on unsecured lending in the country limit household spending.
But “any slowdown in growth will be mild, particularly as the government’s infrastructure drive is likely to boost activity,” he added.