Home/ Economy / GDP growth slows to 4.4% in December quarter

NEW DELHI : India’s economic growth rate slowed to 4.4% in the December quarter as rising interest rates and elevated raw material prices rippled through the economy while global trade languished.

The median estimate of 20 economists polled by Mint had showed that growth likely slowed to 4.7% in the December quarter.

Gross domestic product growth also slowed from 6.3% in the three months ended September and 5.2% in the year-ago December quarter.

Tuesday’s official data showed that the slowing growth rate can be attributed in part to a contraction in manufacturing output caused by high input costs and a diminishing pandemic-related base effect. The moderation in growth also fuelled concerns about the sustainability of pent-up demand that supported consumption post the pandemic.

Data from the ministry of statistics and programme implementation showed that manufacturing output contracted by 1.1% in the December quarter, the second consecutive quarter after a 3.6% contraction seen in the preceding three months.

Both private final consumption expenditure--the biggest driver of growth-- and government spending, as a share of GDP, moderated in the December quarter compared to the previous corresponding quarter, but investment in fixed assets showed an improvement, aided by the government’s thrust on capital expenditure.

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Chief economic adviser V. Anantha Nageswaran told reporters at a briefing after the numbers were released that economic growth is a priority for the government, which was the idea behind stepping up the government’s capital expenditure outlay in the union budget.

Separately, official data from the Controller General of Accounts (CGA) showed on Tuesday that the central government’s fiscal deficit touched 67.8% of the full-year target or 11.91 trillion at the end of January. Experts said that the fiscal deficit may not exceed the revised target of . 17.6 trillion for FY23.

The second advance estimate of FY23 growth has been retained at the earlier projected 7%, a notch above the 6.8% projected by the Reserve Bank of India. For the economy to grow at 7% in the full fiscal year 2022-23, as projected in the first and second advance estimates, a 4.1% growth in the fourth quarter is required.

In the December quarter, cement output, steel consumption, and the sale of commercial and private vehicles increased significantly compared to the same period the previous year, suggesting that the focus on infrastructure development is supporting certain industry sectors.

While farm sector output showed a decent 3.7% growth in the December quarter, mining and quarrying output moderated to 3.7%, and utilities and construction sectors expanded at over 8% annually in the December quarter.

The statistics ministry also raised the FY22 GDP growth upwards to 9.1% from 8.7%.

“Overall, the growth rate that we need to achieve in the fourth quarter is of the order of 4-4.1%, Nageswaran said, adding that high-frequency data indicated that achieving that growth in the fourth quarter was “well within the realm of possibility". “Therefore, the 7% growth rate for FY23 is very realistic, Nageswaran said.

Monthly exports have weakened since October due to a global decline in demand, as major economies raised interest rates to address stubborn inflation. Excluding November, exports have declined in three out of four months since October. In January, merchandise exports dropped for the second consecutive month, declining by approximately 6% due to weakened demand across major markets such as the US and Europe. According to Dipti Deshpande, principal economist at rating agency Crisil Ltd, the slowdown in growth in the December quarter was driven by both external and domestic factors. “The global demand slowdown — particularly for goods — had already begun to hurt India’s export and industrial growth in the second quarter. On top of this, the third quarter also reflected waning momentum in domestic consumption demand," Deshpande said.

Gireesh Chandra Prasad
Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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Updated: 01 Mar 2023, 06:21 AM IST
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