Beating estimates, India’s GDP expands 7.2% in FY23
Economy grows 6.1% in March quarter, accelerating from 4.5% in preceding 3 months
India’s economy grew at 7.2% in FY23, beating the 7% official forecast, driven by robust expansion in agriculture, construction, and services sectors and a rebound in manufacturing in the March quarter, data released by the National Statistical Office on Wednesday showed.
For the quarter ended 31 March, the gross domestic product (GDP) expanded 6.1%, accelerating from 4.5% in the preceding three months and 4% in the year-ago quarter.
Data showed that investment in fixed assets saw a strong growth of 8.92% in the March quarter, driven by the government’s capital expenditure, while household spending saw an uptick of 2.82%. Government spending too showed a growth of 2.29% in the quarter on a high base.
Experts said the negative net exports situation has improved for three consecutive quarters and aided the March quarter growth. They also said the drag from negative net exports on overall GDP could be lower, with an expected improvement in the trade balance in FY24.
Farm sector output expanded at a robust 5.5% adjusted for inflation, while the manufacturing sector rebounded from two consecutive quarters of contraction with a 4.5% growth in the fourth quarter, and the services sector’s strong expansion indicated that the pent-up demand that is boosting consumption after the pandemic is sustaining.
Construction saw a 10.4% growth in the quarter, while trade, hotels, transport, and communication and services related to broadcasting grew at 9.1%.
Chief economic adviser in the finance ministry V. Anantha Nageswaran said at a briefing after the GDP figures were released that private final consumption expenditure was catching up with the pre-pandemic trajectory at the level it would have been had the Covid-19 pandemic not happened and that private investments were beginning to unfold. He said India’s growth prospects are bright.
“Government investment in infrastructure in the last several years is beginning to crowd in private sector investment as can be seen in new project announcements and also from data released by companies about their cash flow projections,” Nageswaran said.
Prime Minister Narendra Modi said in a tweet that the figures underscore the resilience of the Indian economy amid global challenges. “This robust performance, along with overall optimism and compelling macroeconomic indicators, exemplify the promising trajectory of our economy and the tenacity of our people,” Modi said.
An official statement from the finance ministry said enabled by the release of pent-up demand, real private final consumption expenditure (PFCE) surpassed the pre-pandemic trend trajectory. Also, a large step-up in public sector capex over the last three years has contributed to the gross fixed capital formation (GFCF), surpassing the pre-pandemic trend trajectory.
However, experts flagged private consumption as a weak point. Rating agency Ind-Ra said in an analysis that with inflation easing, it expected private consumption growth to acquire momentum, but the current consumption demand is highly skewed in favour of goods and services consumed largely by households falling in the upper-income bracket. A broad-based consumption recovery, therefore, is still some distance away, it said.
Some economists stated that GDP growth could moderate to 6.1% in FY24 due to several factors, including slowing domestic discretionary demand, subdued external demand and financial uncertainties.
“Overall, the share of private consumption in GDP could witness a marginal fall. Investment demand is expected to remain robust. However, global growth slowdown and financial uncertainties could weigh on business optimism,” said Rajani Sinha, chief economist, CareEdge.
Sinha added that rising rural wages, record foodgrain production and the expectation of lower food inflation bode well for the rural demand outlook. However, the development of El-Nino conditions during the monsoon season is a key risk for agriculture production and rural income. Experts further pointed out that inflation is expected to moderate in FY24 relative to FY23, which is a positive for household budgets and consumption.
ravi.dutta@livemint.com
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Business NewsEconomyBeating estimates, India’s GDP expands 7.2% in FY23
First Published:1 Jun 2023, 01:04 AM IST
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