The NSO has estimated that the Indian economy grew by 6.1 per cent year-on-year in Q4, a significant increase from 4.4 per cent in Q3.
In its latest release on May 31, the National Statistical Office (NSO) published two important GDP estimates — one for the quarter January-March 2023 (Q4FY23), and the second, the Provisional Annual Estimates for the year 2022-23 (FY23).
The NSO has estimated that the Indian economy grew by 6.1 per cent year-on-year in Q4, a significant increase from 4.4 per cent in Q3. This increase comes as a refreshing sign, although it is below the 6.3 per cent GDP growth in Q2. The NSO estimate is well above that of the RBI, which estimated the real GDP in Q4 to grow at 5.1 per cent. The key drivers of this significant growth in Q4 of FY23 are manufacturing, construction, agriculture and financial services.
In terms of the estimates for the quarter ending March 2023 (Q4FY23), the manufacturing activity grew by 4.5 per cent. This positive growth can be attributed to the easing of pass-through from high input cost pressures and the reduction in global oil and food prices. This a refreshing development in particular, because manufacturing activity contracted for two consecutive previous quarters amidst high global commodity prices, and sustained input cost pressures, affecting the profit margins of companies. In terms of year-on-year change, manufacturing activity has grown by 1.3 per cent in FY23.
The agriculture sector grew by 5.5 per cent in Q4FY23 in comparison to 3.7 per cent in Q3 indicative of strong rural demand. As per the latest estimates, the sector registered a growth of 4 per cent (year-on-year) in FY23. Rabi acreage also expanded during FY23 with promising crop production, barring damage from unseasonal rains in parts of the country in March 2023. The construction sector also showed significant growth with 10.4 per cent in Q4 in comparison to 8.4 per cent in Q3, which reflects the push towards infrastructure development and potential for employment generation. In terms of services, the financial services sector showed an impressive growth of 7.1 per cent in Q4 in comparison to 5.8 per cent in Q3. On the other hand, activity involving trade, hotel and transport contracted from 9.7 per cent in Q3 to 9.1 per cent in Q4 despite the positive performance expectation from this sector by analysts before the release of the estimates.
The real GDP at constant (2011-12) prices in FY23 is estimated to reach INR 160.06 lakh crore as compared to the First Revised Estimates of GDP for 2021-22 of INR 149.26 lakh crore. The real GDP growth estimate for FY23 stood at 7.2 per cent. This is slower as compared to the 9.1 per cent growth a year ago (in 2021-22). However, this provisional estimate is higher than the NSO’s second advance estimate of 7 per cent (released on February 28, 2023). Moreover, it is in line with the RBI governor, Shaktikanta Das’s recent statement indicating the expectation of annual real GDP growth to surpass 7 per cent.
A major cause of concern, however, is the share of consumption in GDP which has fallen in FY23 as compared to FY22, at current prices. Private consumption expenditure showed a mere 2.8 per cent year-on-year growth. Such a decrease reflects the impact of elevated inflation, rising interest rates and higher borrowing costs. The slowdown in consumption needs to be addressed and measures to elevate consumption are required in order for India to sustain its growth amidst global headwinds.
Looking forward, the RBI’s GDP growth forecast for FY24 is 6.5 per cent. The latest robust growth numbers are indicative of the Indian economy’s resilience despite global uncertainties, and provide substantial impetus for a positive outlook. Although, it should be noted that India's economic outlook is not completely isolated from global developments. The global economy is expected to slow down. As per the IMF’s World Economic Outlook released in April 2023, the global growth for 2023 is expected to be 2.8 per cent. Despite disinflation efforts across jurisdictions, elevated upside pressures continue to exist. Rising debt levels, especially in low and middle-income countries, as well as potential spillovers to the global financial system from the recent banking sector collapses in the US and Europe, are some of the potential financial risks that cannot be ignored. Additionally, the onset of a potential El Nino event leading to a possibility of deficient rainfalls during the South West Monsoon season proves to be a threat to kharif crop production, which can impact India’s growth prospects. RBI’s Annual Report for FY23 (released on May 30, 2023) also acknowledges such potential challenges to Indian economic activity due to an uninspiring and uncertain global outlook.
Certain global factors do signal possible respite. For instance, slight moderation in monetary policy tightening by central banks globally opens the possibility of easing pressure on non-dollar currencies. The recent reduction in global commodity and food prices and easing of pass-through from high input cost pressures also serves as a positive sign, especially for the manufacturing sector. Moreover, domestic measures such as business-friendly policy reforms (such as the Foreign Trade Policy of March 2023), as well as an increase in government capital expenditure, are expected to attract private investment and boost India’s growth prospects in the coming years. Therefore, India’s ability to weather the storm depends on key timely interventions and structural reforms that continue to prove its resilience in the medium as well as long term.
The writer is Consultant-Research Fellow, NIPFP. Views are personal
from The Indian Express https://ift.tt/VC5yUoE
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