The poor show of the manufacturing sector dragged India's GDP (Gross Domestic Product) to 4.4 percent in the third quarter of 2022-23, data released by the National Statistical Office (NSO) on February 28 showed.
In October-December 2021, the economy grew by 11.2 percent while it witnessed a growth of 6.3 percent in the July-September 2022 quarter.
The NSO retained its 2022-23 GDP estimate at 7 percent.
The Gross Value Added (GVA) grew 4.6 percent in Q3FY23 against 5.5 percent in Q2.
The GDP numbers missed Street expectations, raising fears that the road ahead may be tougher.
We collated the views of several analysts and brokerage firms on the GDP numbers. Here's what they said:
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As the external demand conditions remain weak, domestic demand should accelerate. Improving rural demand and rising rural wages are positive developments for aggregate demand.
However, there is expected to be some fizzling out of the pent-up domestic demand seen in the last few quarters. Government's focus on capex and improving the intent of the private sector to invest should be supportive of investment demand but lower external demand and raising interest rates pose downside risks for investment revival.
“We expect GDP growth to moderate to 6.1 percent in FY24,” it said.
Dipti Deshpande, Principal Economist, CRISIL
“Some of these factors will continue to be a drag on growth going into the next fiscal. Our GDP growth estimate of 6 percent for the next fiscal primarily accounts for the impact of slower global growth and higher interest rates biting into growth for some interest rate-sensitive sectors,” said Deshpande.
A sharper-than-expected global growth slowdown and forecasts of an El Nino that can disturb Indian monsoons are the other risks to watch out for.
Ritika Chhabra, Quant Macro Strategist, Prabhudas Lilladher PMS
The Q3 GDP growth rate of 4.4 percent is on the expected lines. The loss in growth momentum is due to fading away of the favourable base effect, the slowdown in pent-up demand is due to high inflation and interest rates and the contraction in manufacturing sectors. Some of the high-frequency indicators were already pointing at muted growth for the quarter vs Q2, hence, the lower GDP growth rate in Q3 didn't come as a surprise.
Nikhil Gupta, Chief Economist, Motilal Oswal Financial Services
“Contrary to our expectation of nearly 4.5 percent year-on-year (YoY) and Bloomberg consensus of 4.6 percent YoY, real GDP growth in Q3FY23 came in at 4.4 percent YoY… This was on account of the collapse in consumption, both private as well as government. Capital formation held up overall GDP growth in Q3,” said Gupta, adding that farm GVA and industrial activities grew faster (despite a contraction in manufacturing) in Q3 but services activity grew at a three-quarter low.
CSO has revised its FY22 real GDP growth to 9.1 percent YoY versus the 8.7 percent estimated earlier. Additionally, the second advance estimates peg FY23 real GDP growth at 7 percent, which means that it expects Q4FY23 to grow by 5.1 percent YoY, which we believe is highly unlikely.
S Ranganathan, Head of Research at LKP Securities
India's Q3 GDP rate of 4.4 percent is in line with RBI estimates and is below consensus estimates primarily due to an upward revision in the base.
GVA during the quarter was up 20bps compared to the GDP. During the quarter, private final consumption was not in line with expectations. Gross Fixed Capital Formation at over 8 percent, however, is encouraging.
Disclaimer: The views and recommendations given in this article are those of individual analysts, broking firms and agencies. These do not represent the views of MintGenie.
