ICRA forecasts India's GDP growth at 5.1% YoY in FY2023

The YoY rise in gross value added (GVA) at basic prices (at constant 2011-12 prices) is anticipated to moderate to 4.9 per cent in Q3 FY2023 from 5.6 per cent in Q2 FY2023. The YoY growth of the combined revenue expenditure of 22 state governments, for which data is available, eased to 5.4 per cent in Q3 FY2023 from 15.9 per cent in Q2 FY2023. While the aggregate capital outlay of the aforesaid 22 state governments rose by 7.8 per cent YoY during Q3 FY2023, the absolute rise was small (₹85 billion), ICRA said in a press release.

In contrast, the government of India's capex contracted by 9.4 per cent YoY in Q3 FY2023 (42.4 per cent in Q2 FY2023). ICRA estimates the industrial GVA to have reverted to a YoY growth of approximately 1.0 per cent in Q3 FY2023 after the mild 0.8 per cent contraction seen in Q2 FY2023, aided by an improvement in all sub-sectors, including manufacturing (to -3.0 per cent from -4.3 per cent) and gas and other utilities (to 7.0 per cent from 5.6 per cent).

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, and more. 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.

“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 the government of India amid a base effect led contraction in its capital spending,” said Aditi Nayar, chief economist, head-research and outreach, ICRA Ltd.

ALCHEMPro News Desk (NB)