India's economy grew by 4.1 percent in the fourth quarter of 2021-22, pushing up the annual growth rate to 8.7 percent, official data showed on Tuesday.
The slowdown in India's gross domestic product (GDP) growth for the March quarter was at a 4-quarter low mainly on the account of the Russia-Ukraine crisis, high commodity prices and the third wave of COVID-19. GDP growth came in at 5.4 percent in the December quarter of FY22.
However, the GDP had expanded by 2.5 percent in the March quarter of FY21. Annually, the Indian economy expanded by 8.7 percent in 2021-22 against a 6.6 percent contraction in 2020-21.
Most experts believe that while the current GDP numbers indicate only a gradual recovery, global macro conditions remain uncertain which is likely to impact the growth going forward. They also cut the GDP growth forecast for the current financial year FY23.
Let's take a look at what the market experts have to say:
Emkay
FY22 GDP growth is revised down again and now stands at 8.7 percent (8.9 percent earlier), with Q4 growth slowing further to 4.1% amid a mild Omicron effect and an unfavorable base effect, the brokerage stated. It added that all sub-sectors, barring trade, transport and communications, have crossed pre-Covid levels by end-March 2022 (still 10.3 percent lower than the pre-pandemic level), while private consumption is merely up 1 percent from pre-Covid levels. Public spending remains the major growth contributor for a second consecutive year.
Emkay slashed its FY23 GDP growth estimate by 80 bps to 7 percent post the numbers. "The evolution of geopolitical reverberations and the magnitude of the energy supply shock are uncertain. This implies a protracted shortage of critical inputs, higher costs, shrinking corporate profitability and demand-curbing global policies. This will put pressure on the domestic growth story, which is yet to be broad-based and still lacks the next lever of secular growth," it said.
Anand Rathi
Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers said, “The Q4 FY22 at 4.1 percent and FY22 GDP growth at 8.7 percent came marginally lower than our expectations. Moreover, the growth comes against the negative base of the pandemic year. Yet, there are several positive indicators as well. The rebound in capex in FY22 is the biggest positive. Even private consumption shows signs of improvement."
It further stated that despite the ongoing geopolitical uncertainties, supply disruptions, high commodity prices, inflation and monetary tightening, the brokerage expects India to continue to be the fastest-growing major economy of the world in FY23 as well with 7.5 percent growth. The broadly in-line growth number, better than expected fiscal number for FY22 and infra growth number for April 2022 would be positive for financial markets, highlighted Hajra.
Motilal Oswal
As per the brokerage, better-than-expected growth in real GVA was driven by better agricultural and industrial sectors (including construction), while the services sector posted a slower than predicted growth in 4QFY22. The farm sector grew at an eight-quarter high of 4.1 percent YoY, while the manufacturing sector contracted just 0.2 percent YoY, it noted.
"Overall, there were no shocks in the GDP data for 4QFY22. Therefore, our broad narrative remains unchanged too. We continue to believe that consumption may remain weak in the coming quarters as a result of a weak household sector. We pencil in a real GDP growth forecast of 6-6.5 percent YoY in FY23 as compared to the RBI's forecast of 7.2 percent," said MOSL.
Knight Frank
Vivek Rathi, Director - Research, Knight Frank India said, “Global spillovers of supply shortages, crude oil shock and higher input costs thwarted India’s growth momentum in Q4FY22. The impact of these factors was widely witnessed in high-frequency mining, manufacturing, and construction indicators. So far in FY23, recovery in India’s domestic macros has been resilient to risks arising from global developments; however, supply-side challenges and inflation spikes, which could dampen consumption and investments in the economy, poses a near-term risk to India’s economic growth.”
Millwood Kane International
Nish Bhatt, Founder and CEO of Millwood Kane International noted that FY22 saw multiple disruptions like Omicron, geo-political tensions, a spike in crude prices, and elevated input costs.
"The heatwave in Q1FY23 may prove to be a dampener but a normal monsoon will be positive that may help improve agriculture output. We believe most disruption is behind us, Covid and geo-political-related tensions have subsided. That said, a spike in crude oil prices and raw materials is the most significant risk to growth going forward," Bhatt added.
