NEW DELHI: Experts are not buoyed by the April-June Gross Domestic Product (GDP) numbers, which are below the projection made by the Reserve Bank of India (RBI) for the quarter. India recorded a GDP growth of 13.5% in the first quarter as against RBI’s estimates of 16.2%.
The euphoria over year-on-year double-digit GDP growth in the quarter dissipates as one looks at the data in detail so much so that research firms and agencies have revised India’s full-year GDP targets. The research team of SBI has cut India’s FY23 GDP estimate to 6.8% from 7.5% earlier. Moody’s has also lowered India’s 2022 GDP growth estimate from 8.8% to 7.7%. Kotak Securities points out that on a quarter-on-quarter (QoQ) basis, real GDP growth contracted sharply by 9.6%.
It says the QoQ contraction was mainly due to government consumption contracting by 10.4% and investments contracting by 6.8%. Kotak Securities also pointed out that government consumption grew at a slower pace of 1.3% year-on-year against 4.8% in 4QFY22. The nominal GDP, or GDP at current prices, during the first quarter, grew by 26.7%, which Kotak Securities attribute to high inflation (mostly WPI). As compared to the pre-pandemic levels in the first quarter of FY20, real GDP growth and real gross value added (GVA) growth in 1QFY23 were quite weak at only 3.8% and 4.7%, respectively.
“Q1 2022-23 GDP growth is only 3.3% in 3 years. Instead of celebrating, we should actually be doing a serious introspection as to why we are standing still after 3 years and what policy actions are needed to put India on a high GDP growth path,” Subhash Chandra Garg, former Finance and Economic Affairs Secretary, said. SBI’s research report said the primary culprit behind less-than-expected growth was the growth in manufacturing sector which grew by a measly 4.8% in April-June.