India's economy grew at its fastest pace in one and a half years in Q4 2023, retaining its title as the fastest-growing major economy in the world.

The country's economy grew 8.4% between October and December last year, surpassing the 6.6% growth forecast by economists surveyed by Reuters, and over the 7.6% growth from Q3.

The data comes as India is due to hold a general election this year, with Prime Minister Narendra Modi stating on social media platform X that it shows "the strength of Indian economy and its potential."

This was echoed by Sunil Kumar Sinha, economist at India Ratings: "The ongoing growth momentum is indicative of the Indian economy's resilience, notwithstanding global headwinds." 

Better-than-forecast growth was fuelled by strong manufacturing activity, with the sector recording 11.6% growth during the quarter.

In addition, private consumption, which makes up nearly two-thirds of GDP, increased by 3.5%, BBC reports.

Furthermore, people's spending power was impacted in 2023 due to elevated prices of staple foods, leading the government to implement a series of steps to help curtail food price inflation.

Over the past few years, Prime Minister Modi has hiked government spending on infrastructure and provided incentives to bolster the manufacturing of semiconductors, phones, electronics and drones to help the country compete with other nations such as Vietnam and Thailand.

Indeed, the government gave the go-ahead to the construction of three semiconductor plants worth 1.26 trillion rupees ($15.2 billion) on Thursday.

However, the agricultural sector, which makes up around 15% of the $3.7 trillion economy, continued to struggle due to the weak monsoon rains. The sector shrank 0.8% in Q4, compared to growth of 1.6% in Q3.

That said, policymakers remain upbeat on a recovery in the sector.

"With the anticipated better value addition in the farm sector next financial year, rural demand growth and rural income growth will be even better and more evident in FY25," said the country's Chief Economic Adviser V Anantha Nageswaran.