As India’s GDP growth halved to 6.3 per cent in the September quarter of the current fiscal from 13.5 per cent in the June quarter, economists said that the fall is in line with broader expectations, including RBI’s own forecast.
Aditi Nayar, Chief Economist at ICRA, said, “The growth of 6.3 per cent came in similar to our estimate of 6.5 per cent, even as the GVA rise of 5.6 per cent trailed our forecast (6.3 per cent) by a wide margin, led by an unexpected contraction in manufacturing that seems to reflect the impact of high input prices on margins in certain sectors.”
At the same time, GVA growth in agriculture, forestry and fishing has been estimated at above 4 percent for the third consecutive quarter, which seems somewhat optimistic based on the decidedly mixed first advance estimates of the kharif crop, that were followed by unseasonally heavy rainfall towards the end of the monsoon season, Nayar added.
“Services stood out as the clear driver of growth in Q2 FY2023, accounting for 5.3 percent of the 5.6 percent GVA growth in this period, with even the pandemic-scarred trade, hotels, transport, communication sub-segment surpassing its Q2 FY2020 performance,” she explained.
GDP growth was boosted by the performance of private consumption expenditure and gross fixed capital formation, whereas government expenditure displayed a discouraging contraction in Q2 FY2023, on account of the modest de-growth in the Centre’s non-interest revenue expenditure.
Additionally, net imports nearly doubled as compared to the year-ago period, exerting a drag on the GDP growth. Moreover, discrepancies stood at a 10-quarter high in Q2 FY2023, which suggest substantial revisions in the sectoral growth prints may lie ahead.
“With the Q2 FY2023 GDP growth only mildly below our forecast, we are retaining our estimate of the real GDP growth for FY2023 at 7.2 percent, although a deepening of the external slowdown poses a risk. The month-on-month momentum displayed by several high frequency indicators in October 2022 is healthy despite the early onset of the festive season, although the latter has clearly dampened YoY growth prints on account of a larger number of holidays, as seen in the marginal 0.1 percent rise in the core sector output in that month,” Nayar said.
Nikhil Gupta, Chief Economist at Motilal Oswal Financial Service, said, “Unexpected deterioration in manufacturing sector drags down the second quarter FY23 GVA growth. Real GDP growth of 6.3 percent YoY is broadly in line with expectations.”