India's GDP grows at 6.1 per cent in Q4

New Delhi: Pushing up the country’s economy to 7.2 per cent in 2022-23 as against 9.1 per cent expansion in previous fiscal, the government on Wednesday said that beating analysts’ estimates India’s gross domestic product or GDP grew at 6.1 per cent in the last quarter of the previous fiscal. The growth is also expected to push the Indian economy to $3.3 trillion and set the stage for achieving $ 5-trillion target in the next few years.

The government’s quarterly economic data, however, has been cheered by almost all India’s policymakers, with Reserve Bank of India (RBI) governor Shaktikanta Das sticking out his next last week and saying he would not be surprised if the GDP growth is higher than 7 per cent due to a strong momentum seen in the last two quarters of the previous fiscal.

Commenting on the GDP data, chief economic adviser V Anantha Nageswaran told media, “We are now prepared to say that risks to our GDP growth forecast of 6.5 per cent for 2023-24 are now more evenly balanced than a few months ago when downside risks to the forecast were greater. We are seeing indications of strong recovery in rural demand. The agricultural sector, which forms the backbone of the rural economy, grew at 5.5 percent in the fourth quarter of FY23.”

On job prospects, Nageswaran said that the capacity utilisation has already crossed 75 percent in several sectors and also pointed out that total employment in the hotel industry was 40 million before the pandemic. “This fell to 29 million during the pandemic but has now increased to 45 million,” he said. On fiscal deficit, he said India is on track to achieve the fiscal deficit target of 5.9 percent of GDP in 2023-24. “The fiscal deficit target of 6.4 percent of the GDP was successfully met in FY23, as per the data released today,” he added.

On inflation, he said there is a very high chance CPI inflation will return to RBI’s medium-term target of 4 percent in 2023-24. “The inflation rate had soared up in the post-pandemic period and following the outbreak of the Russia-Ukraine war, but has now relatively cooled off. The retail inflation rate had come in at 4.7 percent, an 18-month-low, in April,” he added.

According to the data released by ministry of statistics & programme implementation (MOSPI), at 6.1 per cent, the latest quarterly growth number is significantly higher than expectations of 5.1 per cent. “The GDP at constant (2011-12) prices in Q4 2022-23 is estimated at Rs 43.62 lakh crore, as against Rs 41.12 lakh crore in Q4 2021-22, showing a growth of 6.1 per cent. The GDP at current prices in Q4 2022-23 is estimated at Rs 71.82 lakh crore, as against Rs 65.05 lakh crore in Q4 2021-22, showing a growth of 10.4 per cent,” the data showed.

However, the MOSPI data showed, the real GDP or GDP at constant (2011-12) prices in the year 2022-23 is estimated to attain a level of Rs 160.06 lakh crore, as against the first revised estimates of GDP for the year 2021-22 of Rs 149.26 lakh crore. “The growth in real GDP during 2022-23 is estimated at 7.2 per cent as compared to 9.1 per cent in 2021-22. While the nominal GDP or GDP at current prices in the year 2022-23 is estimated to attain a level of Rs 272.41 lakh crore, as against Rs 234.71 lakh crore in 2021-22, showing a growth rate of 16.1 per cent,” it showed.

Among the sectoral performance, the data showed that the agriculture sector growth accelerated to 5.5 per cent from 4.1 per cent. “The electricity, gas, water supply and other utility services segment also grew 6.9 per cent during the fourth quarter from 6.7 per cent in the year-ago period. The GVA growth in the services sector — trade, hotel, transport, communication and services related to broadcasting — was 9.1 per cent in the fourth quarter against a growth of five per cent a year ago,” it showed.

In the CII event last week, Das also said that it initially appeared in the third quarter that there was a pent-up demand which was supporting the economic activity, but all the economic indicators in the fourth quarter of last financial year show that economic activities sustained momentum. “In fact, all the high-frequency indicators, around 70 of them, which we monitored in the RBI, almost in all of these high-frequency indicators, the momentum was maintained in the fourth quarter. So therefore, we should not be surprised if the growth is slightly more than 7 per cent,” Das added.

However, leading economists said that the GDP expansion in Q4 FY23 was appreciably higher than expected, while remaining uneven. “With the expansion relative to the respective pre-Covid levels of FY19 improving to a robust 17.3 per cent in Q4 FY2023 from 15.3 percent in Q3 FY23, the underlying momentum of the Indian economy remains healthy. However, the positive surprise in the GVA growth for Q4 FY23 relative to our forecast was largely driven by the industrial sector,” said Aditi Nayar, chief economist and head (research and outreach), ICRA Ltd.

Nayar also said that inflation is expected to moderate in FY24 relative to FY23 which is a positive for household budgets and consumption. “However, the rise in home loan EMIs and its impact on the budgets of urban households and their consumption demand, contraction in exports and their impact on employment, and the impact of a potential El Nino on crops, food prices and farm incomes remains to be seen,” she added.