Economists Welcome India’s Fourth-Quarter GDP Growth But Warn Of Difficult Conditions

Data on Wednesday showed India’s economy grew 6.1% in the last quarter of the previous year, which is likely to push up its compound growth to 7.2% in fiscal year 2023. Analysts were pleasantly surprised by the strong growth rate, but also warned of uneven terrain.

Private consumption remained weak, but growth exceeded analyst expectations, driven by government and private capital spending.

Manufacturing gross value added (GVA) growth accelerated to 4.5% in the March quarter from 0.6% a year earlier.

His GVA growth in the mining sector in the fourth quarter was 4.3%, compared with 2.3% in the same period last year. The construction sector grew 10.4% in the March quarter, up from 4.9% in the same period in 2021-2022. Growth in the agricultural sector accelerated from 4.1% to 5.5%.

However, both imports and exports decreased, creating a sense of uncertainty about the economic outlook. Barring monsoon-related risks and geopolitical uncertainties, the Indian economy could outperform its initial forecast of 6.5% growth for the current financial year (April 2023 to March 2024).

Personal consumption, which accounts for nearly 60% of the economy, increased by 2.8% year-on-year (up 2.2% from the previous quarter’s revision), and capital formation, an indicator of investment, increased by 8.9% from the August revision. %. . Federal government spending, which accounts for about 10% of GDP, rose 2.3% year-on-year in the most recent quarter, but was revised down 0.6% last quarter.

 

Let’s take a quick look at what experts think about the performance of the Indian economy.

1. Sonal Varma & Aurodeep Nandi, Nomura:

The consistent growth numbers early in the second quarter paint a mixed picture. April data show healthy growth in consumption, services and investment. An increase in new investment projects (CMIE) from Q1-2023 is primarily driven by the transportation sector.

Meanwhile, early signs in May suggest subdued demand for small cars and growing concerns about MHCV sales. Recent company performance shows that sales are declining and profits are increasing. The latter is due to lower input costs, with fast-moving consumer goods companies suggesting continued pressure (inflationary impact) from weak local demand, and IT companies trimming their sales and employment forecasts for FY2024. (global impact), which will weigh on future service exports.

2. ICRA Chief Economist Aditi Nayar:

4Q23 GDP growth significantly better than expected but remains uneven, supported by expectations that the pace of economic activity growth will gradually pick up to 6.1% from a low of 4.5% in Q3FY23 was taken.

Aikura forecasts real GDP growth of 6% in 2024, with up to 50 basis points of downside risk if El Niño impacts monsoon rainfall.

3. Sakshi Gupta, Chief Economist, HDFC Bank
Surprisingly, GDP growth in the fourth quarter was significantly higher than expected, reaching 7.2% for the full year 2022-2023. Growth was led by better-than-expected growth in agriculture and strong growth in services. Almost 70% of the growth comes from the service sector alone.

Despite global headwinds, GDP data supports optimism about India’s recent growth. This does not mean that the growth outlook is without risk, especially with respect to monsoon progression and the risk of a global recession. We expect GDP growth of 5.8-6% in FY24.

4. Radhika Rao, Senior Economist, DBS Bank Singapore:

India’s economy grew 6.1% in the fourth quarter, better than expected. Fixed investment and net exports were the biggest contributors, while private consumption was weak. The boost from supply-side momentum was widespread, especially in manufacturing. Strong GDP growth gives central bank room to extend June recess

Most of the leading indicators for FY2024 Q1 include GST earnings, PMI (services higher than manufacturing), industrial credit growth, steel and cement production, trade deficit narrowing, but still holding It is At the same time, there were very few soft zones (freight, tractor sales, etc.).

5. CareEdge Chief Economist Rajani Sinha:

Growth is expected to slow to 6.1% in FY24 from 7.2% in FY23. This is due to a combination of factors such as the normalization of bases, weakening foreign demand and uncertain financial conditions. As the post-pandemic economic recovery slows, domestic demand in urban areas may moderate somewhat. If core inflation remains high, consumer spending on urban consumer goods could slow.

However, a gradual recovery in rural demand in anticipation of lower food inflation and higher rural wages would support overall consumer demand. However, the occurrence of El Niño events during the monsoon season remains a major risk to agricultural production and rural incomes. Overall, the share of private consumption in GDP could fall slightly.