The gross domestic product (GDP) rose 6.1% in the March quarter from a year earlier, accelerating sequentially as well from the upwardly revised 4.5% in the preceding quarter, data released on Wednesday showed. An ET poll of 20 economists last week estimated 5.1% median growth in the fourth quarter.
“The numbers are a big surprise. Most of us expected a 5% growth. Nobody was expecting much growth in manufacturing,” said former chief statistician Pronab Sen.
Prime Minister Narendra Modi tweeted: “The 2022-23 GDP growth figures underscore the resilience of the Indian economy amidst global challenges. This robust performance along with overall optimism and compelling macro-economic indicators, exemplify the promising trajectory of our economy and the tenacity of our people.”
In nominal terms, without adjusting for inflation, GDP rose 16.1% in FY23 compared with 18.4% expansion in the preceding year.
Strong Fourth Quarter
Manufacturing gross value added (GVA) rose 4.5% in the March quarter from a year earlier, reversing two quarters of contraction.
The government’s capital spending boosted gross fixed capital formation by 8.9% in the quarter, lifting its share in GDP to an all-time high of 35.3%, but private consumption was sluggish with a 2.9% rise.
Overall, GVA grew 6.5% in the quarter compared with 4.7% in the preceding one with construction leading the output increase at 10.4% followed by the trade, hotel, and transport segment at 9.1% and the financial sector at 7.1%.
Farm sector output rose 5.5% in the quarter, the highest in three years.
“The better-than-expected growth in Q4 FY23 is encouraging and is reflective of the sustained strength in domestic demand amid gloomy global outlook,” said Rajani Sinha, chief economist, CARE Ratings.
In the full FY23 fiscal, gross fixed capital formation rose 11.4%, raising its share in GDP to 34%, the highest since FY15. Private consumption was up 7.5% in FY23 from a year earlier with its share hitting its highest since FY07 at 58.5%.
The fall in commodity prices also helped lift growth, reducing the drag from net exports.
“With weak external demand and the fall in commodity prices pushing down import and export values, net exports improved significantly, adding 1.4 pp (percentage points) to headline growth, a swing away from negative contributions in the previous three quarters,” said Rahul Bajoria of Barclays.
Chief economic advisor V Anantha Nageswaran dismissed concerns over private consumption stemming from the weak fourth quarter, pointing out that overall, it remained strong in the last fiscal. He also said that there are signs of recovery in rural demand even as urban demand remains intact and passenger vehicle sales are picking up.
“Government investment is beginning to crowd in private investment,” he said.
On the supply side, construction posted 10% growth in FY23. Trade, hotels and transport rose 14%, financial services 7.1%, manufacturing 1.3% and agriculture 4%.
Reserve Bank of India governor Shaktikanta Das had said last week that FY23 growth may exceed 7% as he outlined the risks to the economy and cautioned that the war against inflation was not over.
The RBI expects the economy to grow 6.5% in the current fiscal, though economists expect the stronger-than-expected FY23 to pull that down.
“A higher growth number than expected at 7.2% will put pressure on growth performance in 2023-24, which we project at 6-6.5%,” said Bank of Baroda chief economist Madan Sabnavis. “The phenomenon of pent-up demand will not be strong, and private-sector investment has to pick up this year.”
CareEdge chief economist Rajani Sinha said, “Rising rural wages, record foodgrain production, and expectation of lower food inflation bodes well for the rural demand outlook. However, development of El Nino conditions during the monsoon season is a key risk for agriculture production and rural income.”
ICRA also sees FY24 growth at 6% but with a downside risk of up to 50 basis points if El Nino affects the June-September monsoon.
The government sees less disruption from the phenomenon.
“Of late, risks from the El Nino effect are being seen as less damaging by the Met department, which is good news,” the CEA pointed out.
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