Battered by weakening demand, India‘s economy is expected to grow at a slower pace of 7 percent in the current fiscal ending March 2023, setting the stage for the country to lose its fastest-growing major economy tag. The 7% expansion projected in the first official estimate released by the Department of Statistics compares with 8.7% growth in gross domestic product (GDP) in 2021-22.
The projections are much lower than the government’s earlier growth forecast of 8-8.5 percent, but higher than the central bank’s projection of 6.8 percent. If the forecast comes true, India’s GDP growth will be lower than Saudi Arabia’s expected expansion of 7.6 percent.
In fact, at 6.3 percent, India’s GDP growth in the July-September quarter was lower than Saudi Arabia’s 8.7 percent. First preliminary GDP estimates, which are used to draw up allocations and other fiscal projections for the next budget due on February 1, have turned out to be more optimistic than actual growth in three of the past four years.
Projections suggest that despite global headwinds and continued geopolitical uncertainty caused by the Russia-Ukraine conflict, the recovery is on track, although there are pressure points. Inflation is flat despite a 225 basis point hike in interest rates since last May, which is likely to moderate demand.
Aditi Nayar, chief economist at ICRA Ltd said “We believe growing, albeit mixed, domestic consumption should help offset some of the pain from weak exports during this period, Given the full-year projections published today by the NBU, we expect some revisions in the sector numbers for H1 or H2 FY2023 in the next data release.” Sunil Sinha, senior director and chief economist, India Ratings & Research, said the way forward will not be easy until private final consumption expenditure (PFCE) fully recovers and is broad-based”.
Aditi Nayar also said “The household sector, which accounts for 44-45 per cent of GVA, saw nominal wage growth decline to 5.7 per cent during FY17-FY21 from 8.2 per cent during FY12-FY16. In fact, real wage growth almost stagnated or even went negative in some months of FY23 due to high inflation. Given that much of the growth in consumer demand is driven by wage growth in the household sector, a revival in their wage growth is imperative for a sustainable economic recovery”.
The first advance estimates for 2022-23 reflected a gap of Rs 4,06,943 crore, almost double the amount of Rs 2,16,842 crore in the 2021-22 GDP growth estimates released on May 31, 2022. The discrepancies were in 2020- 21 Rs. 2,38,638 crores
According to first advance estimates of national income released by the National Statistics Office (NSO) Discrepancies in GDP statistics refer to the difference in national income according to the production and expenditure methods. Manufacturing sector output is estimated to slow to 1.6 percent in the current fiscal from 9.9 percent in 2021-22
Similarly, the mining sector is estimated to grow at 2.4 per cent in the current fiscal against 11.5 per cent in 2021-22.
NSO said “Real GDP or GDP (Gross Domestic Product) at constant (2011-12) Prices in 2022-23 is estimated at Rs 157.60 lakh crore as against the preliminary estimate of 2021-22 GDP of Rs 147.36 lakh crore , issued on May 31, 2022, real GDP growth in 2022-23 is estimated at 7.0 percent, compared with 8.7 percent in 2021-22, nominal GDP or GDP at current prices in 2022-23 is estimated at Rs 273.08 crore against the preliminary estimate of GDP for 2021-22 of Rs 236.65 crore”.
Nominal GDP growth in 2022-23 is estimated at 15.4 percent compared to 19.5 percent in 2021-22. The agriculture sector is expected to register a growth of 3.5 percent in the fiscal year 2022-23, which is more than the 3 percent expansion recorded in the previous financial year.
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