Economists and experts hailed India’s ‘resilient growth’ with GDP growth for FY23 at 7.2 per cent and 6.1 per cent for the fourth quarter of the financial year, despite multiple global headwinds during the year arising from economic and geo-political uncertainties. “India’s economic growth was primarily driven by strong domestic macroeconomic fundamentals. Private consumption expenditure which comprises 61 per cent of the GDP estimates grew by 7.5 per cent, higher than the pre-pandemic five-year average of 6.9 per cent,” said Vivek Rathi, Director Research, Knight Frank India.
The economic growth was driven by pickup in manufacturing activity, recovery in private investment and domestic consumption, government data showed. Private consumption, which showed a 2.8 per cent growth during Q4 and a 7.5 per cent growth in FY23, as a percentage of GDP stood at a 16-year high in 2022-23. Ritika Chhabra- Quant Macro Strategist – Prabhudas Lilladher PMS, meanwhile, said, “The Q4 growth number is a big surprise. However, a mere 2.8 per cent growth in private consumption expenditure indicates waning private sector demand, which is a concern.”
In terms of sectoral performance, GVA in agriculture, forestry and fishing recorded a growth of 4 per cent in FY23. The GVA in construction posted growth of 10 per cent in FY23; trade, hotels, transport, communication & services related to broadcasting posted growth of 14 per cent; financial, real estate & professional services recorded a growth of 7.1 per cent; while manufacturing sector posted a fall in growth at 1.3 per cent during the financial year. While Agri, mining, manufacturing, electricity, and construction components pushed up the overall growth rate, the slowdown in private consumption and public expenditure was a drag on the growth rate. Overall slowdown in imports and a trade surplus also played a role in the higher growth rate,” said Nish Bhatt, Founder & CEO, of Millwood Kane International
Going forward, even as India’s growth continues to surprise positively for the third consecutive year in FY23, Nikhil Gupta, Chief Economist, MOFSL Group, said, “This will change in FY24 as we expect real growth to ease, led by consumption.”
Here are economists and experts’ views on India’s GDP growth…
Rajani Sinha, Chief Economist, CareEdge Ratings
The Centre has stayed on the path of fiscal consolidation meeting the fiscal deficit target at 6.4% of GDP in FY23. Upbeat gross tax collections and thrust on capex have been the major highlights of the Centre’s fiscal performance during the year. Post-pandemic rebound and healthy economic activities supported the buoyancy in gross tax collections. Despite the high subsidy outgo, the quality of expenditure has improved as seen in the lower revenue expenditure to capital expenditure ratio at 4.7 in FY23 compared with 5.4 in the previous fiscal.
Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE
The GDP numbers indicate that the Indian economy has emerged as an outlier after maintaining the growth rate at a higher level as compared to global economies following the breakout of the pandemic. The country’s growth story continues to be aided by strong domestic demand coupled with strengthening activity in the services sector. Outlook for Investment and consumer momentum too is expected to underpin solid growth prospects.
Dharmakirti Joshi, Chief Economist, CRISIL
GDP growth at 7.2% for fiscal 2023 indicates the economy has done better than expected. Importantly, this growth comes on a higher base – due to upward revision of fiscal 2022 data. Net trade was less of a drag in the fourth quarter and strong domestic services lifted the fourth-quarter growth to 6.1% from 5.1% implicit in CSO’s February estimate. Agriculture, too, surprised on the upside with 5.5% growth in Q4. We expect the economy to slow to 6% this fiscal due to spillover to exports from a slowing world and some impact of interest rate hikes on interest sensitive segments. Even at 6%, India will be the fastest growing G-20 economy this fiscal. As for agriculture output and prices, the eyes are riveted on the monsoon.
Ritika Chhabra, Quant Macro Strategist, Prabhudas Lilladher PMS
The Q4 growth number is a big surprise. In particular, on the production side, agriculture growth at 5.5% is much better than expected, despite the unseasonal rains we saw in Jan-March period. The services growth has come on expected lines, supported by robust growth in trade, hotels and financial services. On the expenditure side, the major contributor to the growth is capital formation (at 8.9%) driven by investment expenditure by the government. However, a mere 2.8% growth in private consumption expenditure indicates waning private sector demand, which is a concern.
Vivek Rathi, Director Research, Knight Frank India
A 7.2% economic growth in FY23, indicates resilience in India’s economy despite multiple global headwinds during the year arising from economic and geo-political uncertainties. India’s economic growth was primarily driven by strong domestic macro-economic fundamentals. Private consumption expenditure which comprises 61% of weightage in the GDP estimates grew by 7.5%, higher than the pre-pandemic five-year average of 6.9%. Thus, indicating strong domestic demand despite consumer inflation being a key headwind averaging at 7% in FY23.
Domestic investments as well have indicated some strength, as seen in 9.6% growth in GCF. Growth in investments is crucial for a sustenance of long-term economic growth. So far, the real estate sector has remained strong despite multiple headwinds arising from aggressive interest rate hikes and consumer inflation. This indicates the strong consumer preferences towards home ownership. Since real estate is a derived demand, a sustenance in the economic growth is beneficial to the sector. Going forward, government initiatives such as high allocation to infrastructure spending, and policies to promote domestic manufacturing such as PLIs should be supportive of India’s long term economic growth.
Nish Bhatt, Founder & CEO, Millwood Kane International
The Q4, as well as FY23 growth rate, has been higher than most estimates. This growth has been despite interest rates at a two-decade high, the central bank withdrawing liquidity, and concerns around global growth. This release of the data is timely as the central bank will be announcing its monetary policy in a week’s time. This will encourage a status quo policy on the rate as well as the policy stance. Going forward, a good monsoon year, global growth, and the geopolitical situation will provide further cues on growth.
Arun Singh, Global Chief Economist, Dun & Bradstreet India
GVA growth of 7% in FY23 after 8.8% in FY22 shows the resilience of the Indian economy in spite of multiple headwinds from global monetary policy spillovers to global economic downturn. However, despite these challenges, resilience in the domestic demand, easing of domestic supply chain pressures, the government’s capex push, and strengthening of bank credit helped India to remain as one of the fastest growing economies in the world. Moreover, the easing of inflationary pressure is creating room for an extended pause in the policy interest rate. Improvement in bank credit to the commercial sector in spite of increase in lending rates, easing current account deficit and subsiding inflation pressures indicate stability in the economy. However, it is important to remain vigilant against potential risks from an increase in crude oil prices, the probability of El Nino to create drought conditions and unfavorable geopolitical developments.”
Amit Jain, CMD, Arkade Group
Q4 FY23 GDP at 6.1% is above the expected lines. The growth rate for FY23 at 7.2 percent is also marginally higher than the consensus. Construction, finance, trade and hospitality sectors have contributed positively to GDP growth. The positive GDP data will encourage a status quo on policy rates as well as the policy stance. Going forward these factors and improving sentiment will positively impact demand in sectors like housing and real estate.
