PremiumIndia Q1 GDP: The Indian economy expanded at the quickest pace in a year, fueled by consumption, boosting the RBI's scope to focus on taming inflation. Gross Domestic Product (GDP) in the first quarter (April-June) of this fiscal year grew by 13.5%, as against a 20.1% growth seen during the same period last year, data released by the National Statistical Office (NSO) showed on Wednesday.
"Reopening of the service sector was a key source of support for 1QFY23 headline growth, contributing to over two-third of the lift. On the demand end, consumption held ground, as did fixed asset investments, whilst high commodity prices led net exports to emerge as a significant drag," said Radhika Rao, Senior Economist, DBS Bank. "Notwithstanding the slight miss in Jun22 quarter growth vs official projections, the RBI MPC is focused on tackling inflation and the GDP outcome is unlikely to alter the rate hike path. With 140bp worth tightening behind us, we look for 60bp more hikes in the repo rate within this year, which will leave the real rate in positive territory by end-FY23."
"GDP growth rose by 13.5% in Q1 led by a low base from last year. That said, there are signs of sequential recovery in certain sections, especially in contact intensive services. Manufacturing growth was disappointing while agriculture growth was on the positive side," said Sakshi Gupta, Principal Economist, HDFC Bank. "Going forward, we expect growth to be close to 7% for the whole year and close to 4.5% average in H2. Given the rising global headwinds, downside risks to growth remain and the RBI is unlikely to be ultra aggressive in monetary tightening — like the Fed. We expect a smaller 25bps rate hike in the September policy."
While India remains the world’s fastest growing economy, the pace of growth is seen moderating going forward due to global recession fears and rising borrowing costs.
“We are seeing signs of waning of the intensity of tailwind generated by economic reopening," said Kunal Kundu, an economist with Societe Generale GSC Pvt. “Add rising borrowing cost to benign domestic consumption prospects, and business investment could be potentially underwhelming."
Mining growth has been almost flat on a sequential basis while electricity, public admin, construction and fin, real estate saw a big jump.
Industries growth for the first quarter of FY23 has come in below estimates while services growth is in-line and agri higher than estimates.
- Industries growth at 8.6%
- Services growth at 17.6%
- Agri growth at 4.5%
GVA for the first quarter of FY23 (April-June) has come in at 12.7%.
"Nominal GDP or GDP at Current Prices in Q1 2022-23 is estimated at ₹64.95 trillion, as against ₹51.27 trillion in Q1 2021-22, showing a growth of 26.7% as compared to 32.4% in Q1 2021-22," said MoSPI in a statement.
India's GDP grows at 13.5% in April-June 2022-23. This is lower than RBI's projections of 16.2% economic growth.
Real GDP or Gross Domestic Product (GDP) at Constant (2011-12) Prices in Q1 2022-23 is estimated to attain a level of ₹36.85 lakh crore, as against ₹32.46 lakh crore in Q1 2021-22, showing a growth of 13.5% as compared to 20.1% in Q1 2021-22.
India's Gross Domestic Product (GDP) in the first quarter (April-June) of this fiscal year grew by 13.5%, as against a 20.1% growth seen during the same period last year, data released by the National Statistical Office (NSO) showed on Wednesday.
The government data to be released today will elaborate on the expansion of different sectors such as agriculture and manufacturing in the first quarter of this financial year.
Core sector output slows down to 4.5% in July against 9.9% a year ago, government data showed on Wednesday.
Economic data like GDP growth rate are calculated on a year-on-year basis. The last time India's GDP achieved higher annual growth was in April-June 2021, when it was 20.1% higher than the pandemic-depressed level of a year before.
- Service sector
- Investment
- Consumption
- Agriculture
- Manufacturing
Many economists expect another rate hike of about 50 basis points in September, followed by one more of 25 basis points thereafter.
The RBI says the country's GDP is expected to witness a growth of 7.2% in the current fiscal amid elevated inflation at 6.7%. Both the Central Government's and RBI's focus will be to curb inflation, which has remained above the central bank's tolerance level of 6% since January 2022. Besides, the falling rupee hovering around 80 per dollar is adding pressure to inflation.
“Exogenous forces will act as counterweights, including impact of the heatwave on farm output followed by uneven start to the monsoon, sharp rise in commodity prices impinging on corporate margins and an uncertain global environment," said Radhika Rao, an economist with DBS Bank Ltd.
“As growth recovery progresses, capacity utilization in manufacturing sector has now risen," said Gaura Sen Gupta, an economist with IDFC First Bank Ltd. “This is likely to support improvement in investment, provided firms’ outlook on growth recovery remains positive."
Besides rate hikes, a global slowdown will also weigh on India's economy. The US Federal Reserve’s resolve to keep raising rates until inflation is under control may hurt Indian exports and thus drive domestic output lower.
The Indian rupee Tuesday dropped to a fresh record low and key stock gauges declined amid a global surge in risk-off sentiment after central bankers delivered a hawkish message at Jackson Hole.
Challenges also remain on the domestic front from rising prices of key staples such as rice and wheat amid factors such as climate change. If not contained, this could again fuel food inflation, which comprises about half of India’s consumer price index basket.
The Statistics Ministry is due to release the data for the first quarter of the fiscal year that started April 1 at 5:30 pm India time on Wednesday. Stock and bond markets will be shut on the day for a local holiday.
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