India’s GDP Update: Hit by weak demand, the Indian economy is expected to grow at a slower 7 per cent in the current fiscal year ending March 2023, setting the stage for the country to lose the tag of the fastest growing major economy. The projected 7 per cent expansion in the first official estimate released by the statistics ministry compares with 8.7 per cent gross domestic product (GDP) growth in 2021-22.
This estimate is much lower than the government’s earlier estimate of 8-8.5 percent growth but higher than the Reserve Bank’s estimate of 6.8 percent. If the forecast comes true, India’s GDP growth will be lower than Saudi Arabia’s projected 7.6 percent expansion. In fact, India’s GDP growth stood at 6.3 per cent in the July-September quarter, lower than Saudi Arabia’s 8.7 per cent.
The first advance GDP estimates, which are used to work out allocations and other fiscal projections for the next budget due on February 1, proved more optimistic than actual growth in three of the past four years.
recovery on track
Projections suggest that despite global headwinds and ongoing geopolitical uncertainty caused by the Russia-Ukraine conflict, the recovery is on track, although there are pressure points. Inflation has remained stable despite a 225 basis point increase in interest rates since last May, which is likely to dampen demand.
“We believe this should help ease the pain arising from weaker exports during this period despite mixed domestic consumption,” said Aditi Nayar, chief economist at ICRA Ltd.
“Looking at the full year estimates released by NSO today, we expect some revisions in H1 or H2 FY2023 sectoral numbers in subsequent data releases.”
“The Road Ahead Is Not Easy”
Sunil Sinha, senior director and principal economist at India Ratings and Research, said the road ahead will not be smooth until private final consumption expenditure (PFCE) recovers fully and becomes broad-based.
“The domestic sector, which accounts for 44-45 per cent of GVA, saw a nominal wage growth of 5.7 per cent during FY17-FY21 from 8.2 per cent during FY12-FY16. In fact, real Wage growth turned almost flat or even turned negative in some months of FY23 due to high inflation.
“Since growth in consumer demand is driven by household sector wage growth, improving their wage growth is imperative for a sustainable economic recovery,” he added.
Discrepancies of Rs 4,06,943 crore have been included in the First Advance Estimates for 2022-23, amounting to Rs 2,16,842 crore in the Provisional Estimates of GDP growth for 2021-22 released on 31st May, 2022. is doubled. 2,38,638 crore in 2020-21 was Rs. Discrepancies in statistical GDP data reflect differences in national income under the production method and the expenditure method.
The output of the manufacturing sector is expected to decline
According to the first advance estimates of national income released by the National Statistical Office (NSO) on Friday, the manufacturing sector output is estimated to decline from 9.9 per cent in 2021-22 to 1.6 per cent in the current fiscal.
Similarly, the growth of the mining sector is estimated to be 2.4 per cent in the current financial year, as against 11.5 per cent in 2021-22. Real GDP or GDP (Gross Domestic Product) at constant (2011-12) prices in the year 2022-23 is estimated to be Rs 157.60 lakh crore, while the provisional estimate of GDP for the year 2021-22 was Rs 147.36 lakh crore. , released on May 31, 2022,” said a statement from the NSO.
It said that the real GDP growth during 2022-23 is estimated to be 7.0 per cent as compared to 8.7 per cent in 2021-22. It also said that the nominal GDP or GDP at current prices in the year 2022-23 is estimated at Rs 273.08 lakh crore, while the provisional estimate of GDP for the year 2021-22 was Rs 236.65 lakh crore.
Nominal GDP growth during 2022-23 is estimated at 15.4 per cent as compared to 19.5 per cent in 2021-22. The agriculture sector is estimated to witness a growth of 3.5 per cent in the financial year 2022-23, higher than the 3 per cent expansion recorded in the previous financial year.
Trade, hotels, transport, communication and services belonging to the broadcasting segment are estimated to grow from 11.1 per cent to 13.7 per cent in 2021-22. The financial, real estate and professional services segment is estimated to grow at 6.4 per cent in the current financial year, up from 4.2 per cent in 2020-22.
However, construction sector growth is expected to decelerate to 9.1 per cent from 11.5 per cent a year ago. Similarly, the growth of public administration, defense and other services is estimated to decelerate from 12.6 per cent in FY12 to 7.9 per cent in this fiscal. The growth in gross value added (GVA) at basic prices is pegged at 6.7 per cent this fiscal, as against 8.1 per cent in 2021-22.
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