In the April-June quarter, GDP growth stood at 13.5 percent.
For Q3FY23, experts predict moderation in the growth momentum as the economic activity in the quarter remained distinctly uneven. Although, among key sectors, agriculture is likely to see reasonable improvement.
Here’s what experts say:
India's economic growth likely slowed to 4.7% in the December quarter from 6.3% in the preceding three months, according to the median of estimates by 20 economists polled by Mint.
Radhika Rao, an economist at DBS Bank, said the growth data, due for release on 28 February, 2023, is likely to point to “further strengthening in the growth momentum".
“Our mix of high-frequency data points to a sequential improvement in the quarter, even as y-o-y growth is set to moderate on base effects," said Radhika Rao, an economist at DBS Bank.
With continued uncertainties on the global front and sticky core inflation trends, the growth prospects in the coming quarters are not very encouraging, said Jyoti Prakash Gadia, Managing Director at Resurgent India, pegging the Q3FY23 GDP growth rate in the range of 4% to 4.5 %.
She said that globally various agencies are predicting a downward revision of the growth projections for most of the major economies which will also impact India.
“Although agriculture is expected to perform reasonably, the overall demand growth is not adequate and as a result, the Q3 growth rate of GDP is expected to be lower in the range of 4% to 4.5 %. While the overall full-year growth prospects are converging towards 6.5 % to 7.%, the Q3 and Q4 rates are also likely to be impacted by the 'Base Effect ', thereby resulting in growth expectations. The next financial year may, however, bode well on the GDP front with positive outcomes of infrastructure and logistics development being emphasized by the Government," said Jyoti Prakash Gadia, Managing Director at Resurgent India.
ICRA has projected the year-on-year (YoY) growth of GDP in Q3 FY2023 at 5.1%, a base effect-led moderation from the 6.3% recorded in Q2 FY2023. However, the growth in GDP over the pre-Covid levels is expected to improve further to 11.6% in Q3 FY2023 relative to the 7.6% seen in the previous quarter, boosted by continued recovery in the services sector, it said.
“Economic activity in Q3 FY2023 remained distinctly uneven, amid the upsides offered by the robust demand for contact-intensive services and upbeat sentiment during the festive season. Trends in Government spending were disparate, with a healthy revenue spending by the Government of India (GoI) amid a base effect led contraction in its capital spending. Similarly, while the services sector exports posted a sharp 25% YoY expansion, non-oil merchandise exports contracted by 8.2% in the same quarter. The advance estimates of kharif production, too, indicate a mixed trend in crop output, with a YoY rise in sugarcane, cotton, coarse cereals and oilseeds, and a decline in rice and pulses. Amid continuing input price pressures for certain sectors, we project the GDP growth in Q3 FY2023 at 5.1%," said Aditi Nayar, Chief Economist, Head-Research & Outreach, ICRA Ltd.
The yearly rise in gross value added (GVA) at basic prices (at constant 2011-12 prices) is anticipated to moderate to 4.9% in Q3 FY2023 from 5.6% in Q2 FY2023.
While the growth in the services sector would display a base-effect led moderation (to +7.4% from +9.3%, respectively), it would outpace the rise in agriculture, forestry and fishing (+4.0% in Q3 FY2023) and industry (+1.0% in Q3 FY2023), ICRA noted.
“The YoY performance of 12 of the 14 high frequency indicators of the services sector expectedly worsened in Q3 FY2023 relative to Q2 FY2023, on a normalising base, even as some contact-intensive sectors saw their performance recovering close to the pre-Covid levels in Q3 FY2023. The YoY growth of the combined revenue expenditure of 22 state governments, for which data is available[1], eased to 5.4% in Q3 FY2023 from 15.9% in Q2 FY2023. However, led by higher release of subsidies, especially to the fertiliser sector, the GoI’s non-interest revenue expenditure expanded by 13.4% in Q3 FY2023 after having contracted by 1.4% in Q2 FY2023. Overall, ICRA projects the GVA growth of the services sector at 7.4% in Q3 FY2023," said ICRA.
Investment activity was buoyant in Q3 FY2023, with an improved performance of several investment-related indicators relative to Q2 FY2023, such as the output of capital goods (to +8.8% from +6.9%) and infrastructure/construction goods (to +7.3% from +5.3%) and the value of new project announcements (to a three-quarter high of Rs. 6.6 trillion in Q3 FY2023 from Rs. 4.4 trillion in Q2 FY2023).
While the aggregate capital outlay of the aforesaid 22 state governments rose by 7.8% YoY during Q3 FY2023, the absolute rise was small (Rs. 85 billion). In contrast, the GoI’s capex contracted by 9.4% YoY in Q3 FY2023 (+42.4% in Q2 FY2023), partly on account of a high base related to Air India’s equity infusion in December 2021 (Rs. 0.6 trillion).
ICRA estimates the industrial GVA to have reverted to a YoY growth of ~1.0% in Q3 FY2023 after the mild 0.8% contraction seen in Q2 FY2023, aided by an improvement in all the four sub-sectors, namely manufacturing (to -3.0% from -4.3%), mining and quarrying (to +5.0% from -2.8%), electricity, gas, water supply and other utilities (to +7.0% from +5.6%) and construction (to +7.0% from +6.6%). Manufacturing volumes in Q3 FY2023 were partly constrained by the ongoing slowdown in external demand and lag in domestic demand for consumer durables relative to pre-Covid levels, as seen in the decline in output for segments such as textiles, leather products, electrical equipment, etc. Nevertheless, the demand for other goods such as automobiles was robust during the festive season. Some sectors continued to witness margin pressure in Q3 FY2023, with commodity prices appreciably higher than the year-ago levels, which is likely to have weighed on GVA growth.
Based on the mixed trend in the production of kharif crops indicated in the 2nd Advance Estimates for FY2023, ICRA estimates the agri-GVA growth at 4.0% for Q3 FY2023, a slight downtick from the 4.5-4.6% seen in the previous two quarters.
The RBI had projected the real GDP growth for 2022-23 at 6.8 per cent, and for the third quarter at 4.4 per cent.
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