India’s GDP Numbers Higher Than Expected

New Delhi: India’s gross domestic product (GDP) growth for FY23 is estimated at 7.2 per cent, the National Statistical Office (NSO) announced on Wednesday. According to NSO, which comes under the Ministry of Statistics and Programme Implementation, the growth in real GDP during 2022-23 is estimated at 7.2 per cent as compared to 9.1 per cent in 2021-22.

The GDP growth during the fourth quarter of 2022-23 was at 6.1 per cent, NSO said. However, economists were of the view that the numbers were higher than what was expected earlier.

The NSO said the GDP in the year 2022-23 is estimated to attain a level of Rs 160.06 lakh crore, as against the First Revised Estimates of GDP for the year 2021-22 of Rs 149.26 lakh crore. The growth in real GDP during 2022-23 is estimated at 7.2 per cent as compared to 9.1 per cent in 2021-22. Similarly, the GDP in Q4 2022-23 is estimated at Rs 43.62 lakh crore, as against Rs 41.12 lakh crore in Q4 2021-22, showing a growth of 6.1 per cent, the NSO said.

Reserve Bank of India (RBI) Governor Shaktikanta Das, at the recent annual conference of the Confederation of Indian Industry (CII), had said there are chances of India’s gross domestic product (GDP) for FY23 crossing the estimated 7 per cent growth going by the trends. He was confident that India’s GDP growth rate for FY24 at 6.5 per cent.

GDP growth at 7.2 per cent for fiscal 2023 indicates the economy has done better than expected. Importantly, this growth comes on a higher base – due to upward revision of fiscal 2022 data, said Dharmakirti Joshi, Chief Economist, CRISIL.

“We expect the economy to slow to 6 per cent this fiscal due to spillover to exports from a slowing world and some impact of interest rate hikes on interest sensitive segments. Even at 6 per cent, India will be the fastest growing G-20 economy this fiscal. As for agriculture output and prices, the eyes are riveted on monsoon,” Joshi said.

On the GDP numbers, Madhavi Arora, Lead Economist, Emkay Global Financial Services, said: “The better than expected GDP print for 4QFY23 is helped by healthier capital formation and more importantly, net exports which appears to be not-a-drag on growth, as usually seen in the cost given India is a net importer.”

However, weaker private consumption is still a worry albeit looks a bit difficult to fathom, when one compares robust value added growth of consumption sectors like trade, Hotels, Transport, Communication services, Arora said.

“Another anomaly was a big discrepancy print in Q4GDP along with the big gap between GDP and GVA (gross value added) growth, with GVA growth outdoing GDP with a wide margin, depicting net indirect taxes (adjusted for subsidies) de-grew. That said, overall a healthy growth print augurs well and also validates the fact that India’s growth momentum is sustained well in FY23,” she added.

According to Aditi Nayar, Chief Economist and Head – Research and Outreach, ICRA Ltd, the GDP expansion in Q4 FY2023 was appreciably higher than expected, while remaining uneven and confirming the hopes of a sequential pickup in the pace of growth of economic activity to 6.1 per cent from the bottom of 4.5 per cent seen in Q3 FY2023.

Benefitting from the positive surprise for Q4, the FY2023 GDP growth of 7.2% exceeded the advance estimate of 7 per cent by a healthy margin, she added. With the expansion relative to the respective pre-Covid levels of FY2019 improving to a robust 17.3 per cent in Q4 FY2023 from 15.3 per cent in Q3 FY2023, the underlying momentum of the Indian economy remains healthy.

“The positive surprise in the GVA growth for Q4 FY2023 relative to our forecast was largely driven by the industrial sector. Manufacturing growth rebounded to a YoY growth of 4.5 per cent in Q4 FY2023 after having contracted in each of the last two quarter, amid an uptick in the YoY growth in manufacturing volumes as well as an improvement in margins during the quarter, partly on account of a sustained moderation in input costs,” Nayar said.

As regards the outlook for FY24, Nayar said ICRA projects growth of real GDP at 6 per cent, with a downside risk of up to 50 bps in the event that an El Nino affects the monsoon rains.

“At the same time, frontloaded capex by the GoI and the States and a rapid execution of infra projects could provide an upside to our GDP estimates for the fiscal. We foresee the nominal GDP growth at 10 per cent for FY2024,” Nayar said.

Inflation is expected to moderate in FY2024 relative to FY2023 which is a positive for household budgets and consumption. However, the rise in home loan EMIs and its impact on the budgets of urban households and their consumption demand, contraction in exports and their impact on employment, and the impact of a potential El Nino on crops, food prices and farm incomes remains to be seen, Nayar remarked.

“The Q4 growth number is a big surprise. In particular, on production side, agriculture growth at 5.5 per cent is much better than expected, despite the unseasonal rains we saw in Jan-March period. The services growth has come on expected lines, supported by robust growth in trade, hotels and financial services. On expenditure side, the major contributor to the growth is capital formation (at 8.9 per cent) driven by investment expenditure by the government. However, a mere 2.8 per cent growth in private consumption expenditure indicates waning private sector demand, which is a concern,” said Ritika Chhabra Quant, Macro Strategist – Prabhudas Lilladher PMS.