Aided by the good performance of the agriculture and services sectors, India’s Gross Domestic Product (GDP) is expected to grow 7 percent in the financial year 2022-23, supported by higher growth in the agriculture and services sectors, according to the first advance estimates of national income released by the National Statistical Office (NSO) Friday. This is slower than the 8.7 percent GDP growth in 2021-22 but slightly higher than the Reserve Bank of India (RBI) forecast of 6.8 percent for the current financial year.
Gross Value Added or GVA — which is GDP minus net product taxes — is seen growing at sub-7 percent – 6.7 percent in FY23 as against 8.1 percent last fiscal. The GDP projection of 7 percent factors in a 0.2 percent contraction in private final consumption expenditure during October-March, the second half of the current financial year, indicating weak demand and the impact of slowing exports. However, the assumption of 11.9 percent export growth for October-March is seen as optimistic by experts, in the backdrop of a slowing global economy and declining export demand.
This marks the first official government estimate for economic growth ahead of the upcoming Union Budget for 2023-24. The first advance estimates, obtained by extrapolation of seven months’ data, are released early in January to help officers in the Union Finance Ministry and other departments frame the broad contours of the budget for the next financial year. The second advance estimate of GDP is then released in February-end.
As per the data released Friday, India’s nominal GDP, which factors in the inflation rate, is set to grow by 15.4 percent in 2022-23, down from 19.5 percent in 2021-22. Among sectors, agriculture is seen growing at 3.5 percent in FY23 as against 3 percent growth in the previous year, while the manufacturing sector is seen growing at 1.6 percent as against 9.9 percent last fiscal. Electricity generation is estimated to grow 9 percent as against 7.5 percent last year, while the construction sector is seen growing at 9.1 percent as against 11.5 percent last fiscal.
The services sector, especially hospitality and financial services, is expected to post a strong rebound. Trade, hotels, and transport services are projected to post a growth of 13.7 percent in 2022-23 from 11.1 percent growth last fiscal. Financial, real estate, and professional services are seen growing at 6.4 percent in FY23 from 4.2 percent. However, public administration, defense, and other services are seen posting a slower growth rate of 7.9 percent in FY23 as against 12.6 percent growth last fiscal.
Private final consumption expenditure – a measure of consumption of goods and services by individuals – is seen growing at a slower pace of 7.7 percent in FY23 as against 7.9 percent a year ago. For the second half, October-March, it is seen contracting 0.2 percent. Gross fixed capital formation – a proxy for investment activity – is seen growing at 11.5 percent as against 15.8 percent growth last fiscal. Government expenditure is seen growing 3.1 percent as against 2.6 percent last fiscal coming on the back of a CAPEX push.
“On the demand side, while private final consumption expenditure, gross fixed capital formation, and exports are expected to witness reasonably good growth, government final consumption expenditure may record a low single-digit growth… A healthy growth of 11.5 percent year-on-year growth in GFCF in FY23 reflects the sustained focus of the government on CAPEX. This is more heartening because it has come on a high base of FY22 where by GFCF had grown 15.8 percent… for sustainable growth and recovery of the Indian economy revival of private corporate sector CAPEX is a must,” Sunil Kumar Sinha, Principal Economist, India Ratings said.
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Source:
Online/GFMM
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