NEW DELHI: The gross domestic product (GDP) in the third quarter of FY23 is expected to moderate to 4.6-5 per cent on account of continuous rate hikes by the Reserve Bank of India (RBI), input price pressure in some sectors and slowdown in consumption.
The GDP grew at 6.3 per cent in the second quarter. While rating agencies ICRA and Crisil have pegged the GDP growth in the third quarter at 5.1 per cent and 5.2 per cent, respectively, economists from Bank of Baroda and SBI estimate the growth at a much lower rate of 4.6 per cent.
“Corporate profit is down in the third quarter. This will keep value-added growth in some sectors low,” Madan Sabanavis, chief economist with the Bank of Baroda (BoB) said. Growth in Q3 is although better than in Q2, however, it has largely been uneven across sectors with a few of them registering better growth than others.
Input cost pressure continues to impinge on the profits of firms. “The impact was visible on corporate results of industries such as textiles, refineries, chemicals, metal and even plastic,” Jahnavi Prabhakar, economist with the BoB said in a report. However, other sectors like construction, agriculture, electricity, and services fared better in the quarter.
As per ICRA, growth of GDP in the quarter would grow at 5.1 per cent, a base effect-led moderation from 6.3 per cent registered in Q2, FY23. However, the growth over the pre-Covid levels is expected to improve further to 11.6 per cent in Q3FY23, relative to 7.6 per cent seen in the previous quarter, boosted by continued recovery in the services sector.
“The advance estimates of kharif production, too, indicate a mixed trend in crop output, with a YoY rise in sugarcane, cotton, coarse cereals and oilseeds and a fall in rice and pulses. Amid continuing input price pressures for certain sectors, we project the GDP growth in Q3 at 5.1 per cent,” Aditi Nayar, chief economist, head-research & outreach, ICRA said. Lekha S Chakrborty, professor at the National Institute of Public Finance and Policy said it is difficult to assess the economy as the geopolitical conditions are dynamic.