Financial, real estate and professional services segment is projected to grow at 6.4 per cent in the current fiscal, up from 4.2 per cent in 202-22
New Delhi:
The Indian economy is estimated to grow at 7 per cent in the 2022-23 fiscal, down from 8.7 per cent a year ago, mainly due poor performance of mining and manufacturing sectors.
As per the first advance estimates of national income released by the National Statistical Office (NSO) on Friday, the manufacturing sector output is estimated to decelerate to 1.6 per cent in the current fiscal from 9.9 per cent in 2021-22.
Similarly, mining sector growth is estimated at 2.4 per cent in the current fiscal as against 11.5 per cent in 2021-22.
”Real GDP or GDP (Gross Domestic Product) at Constant (2011-12) Prices in the year 2022-23 is estimated at Rs 157.60 lakh crore, as against the Provisional Estimate of GDP for the year 2021-22 of Rs 147.36 lakh crore, released on 31st May, 2022,” an NSO statement said.
It stated that growth in real GDP during 2022-23 is estimated at 7.0 per cent as compared to 8.7 per cent in 2021-22.
The NSO estimates are a tad higher than the 6.8 per cent GDP growth projection of the Reserve Bank of India (RBI).
It also said the nominal GDP or GDP at Current Prices in the year 2022-23 is estimated at Rs 273.08 lakh crore, as against the Provisional Estimate of GDP for the year 2021-22 of Rs 236.65 lakh crore.
The growth in nominal GDP during 2022-23 is estimated at 15.4 per cent as compared to 19.5 per cent in 2021-22.
The agriculture sector is projected to see a growth of 3.5 per cent in FY2022-23, higher than the 3 per cent expansion recorded in the previous financial year.
Trade, hotel, transport, communication and services related to broadcasting segment is estimated to grow at 13.7 per cent from 11.1 per cent in 2021-22.
Financial, real estate and professional services segment is projected to grow at 6.4 per cent in the current fiscal, up from 4.2 per cent in 202-22.
However, construction sector growth is expected to decelerate to 9.1 per cent from 11.5 per cent a year ago.
Similarly, public adminstration, defence and other services growth is estimated to drop to 7.9 per cent this fiscal from 12.6 per cent in FY22.
The growth in gross value added (GVA) at basic prices is pegged at 6.7 per cent this fiscal, down from 8.1 per cent in 2021-22.
IMF bullish on Indian economy despite signals of global downturn
Even as the world economy is looking at recessionary trends owing to the prevailing global headwinds and fluid geopolitical situation due to the prolonging Russia-Ukraine conflict, the International Monetary Fund (IMF) has shown optimism about the Indian economy, suggesting that real GDP is expected to grow at 6.8 per cent in the current fiscal while in 2023-24 it is estimated to grow at 6.1 per cent.
On November 28, the executive board of the IMF concluded the Article IV consultation with India, where it noted that the “Indian economy has rebounded from the deep pandemic-related downturn.”
It said: “Real GDP grew by 8.7 per cent in 2021-22, bringing total output above pre-pandemic levels. Growth has continued this fiscal year, supported by a recovery in the labour market and increasing credit to the private sector.”
“New COVID cases have fallen to low levels, supported by high vaccination rates. The free administration of booster shots and broader booster eligibility criteria should help improve vaccine coverage.”
The Indian government’s policies, according to the international body, are addressing new economic headwinds. “These include inflation pressures, tighter global financial conditions, the fallout from the war in Ukraine and associated sanctions on Russia, and significantly slower growth in China and advanced economies,” the IMF noted.
“The authorities have responded with fiscal policy measures to support vulnerable groups and to mitigate the impact of high commodity prices on inflation. Monetary policy accommodation has been gradually withdrawn and the main policy rate has been increased by 190 basis points so far in 2022,” it added.
Elaborating on India’s growth trajectory, the IMF said: “Growth is expected to moderate reflecting the less favourable outlook and tighter financial conditions. Real GDP is projected to grow at 6.8 per cent and 6.1 per cent in 2022-23 and 2023-24 respectively.”
“Reflecting broad-based price pressures, inflation is projected at 6.9 per cent in 2022-2023 and is expected to moderate only gradually over the next year. The current account deficit is expected to increase to 3.5 per cent of GDP in 2022-23 as a result of both higher commodity prices and strengthening import demand.”
Uncertainty around the outlook is high, with risks tilted to the downside. A sharp global growth slowdown in the near term would affect India through trade and financial channels. Intensifying spillovers from the war in Ukraine can cause disruptions in the global food and energy markets, with significant impact on India.
Over the medium term, reduced international cooperation can further disrupt trade and increase financial markets volatility. Domestically, rising inflation can further dampen domestic demand and impact vulnerable groups.
On the upside, however, successful implementation of wide-ranging reforms or greater than expected dividends from the remarkable advances in digitalization could increase India’s medium-term growth potential.
The IMF executive directors concurred during the deliberations that Indian government has appropriately responded to post-pandemic economic shocks with fiscal policy measures to support vulnerable groups and with front-loaded monetary policy tightening to address elevated inflation.
They generally noted that while public debt sustainability risks have increased, these risks are mitigated given the debt characteristics.
The directors encouraged a more ambitious and well-communicated medium-term fiscal consolidation, anchored on stronger revenue mobilisation and further improvement in expenditure efficiency, while high-quality spending on infrastructure, education and health is protected.
They also observed that further improvements in public financial management, fiscal institutions and transparency would support consolidation efforts.
The directors noted that additional monetary policy tightening should be carefully calibrated and clearly communicated to balance inflationary objectives and impact on economic activity.
Experts predict India’s emergence as ‘third pole’, despite GDP growth worries
If any major middle-income country is truly outperforming in the coming decades, it’s the world’s soon-to-be third largest economy (and its largest democracy), India, Eurasia Group said in a report.
“In my view, 2023 will be remembered for India’s emergence as the third pole of the world,” wrote Shigesaburo Okumura, Editor-in-Chief of Nikkei Asia, in a recent article.
Another important factor not to be neglected is India. This year will likely be remembered for marking its emergence as the world’s most populous nation, Okumara wrote.
According to the UN, China’s population last year was 1.426 billion while India’s was 1.417 billion. In July, the UN forecast that China’s population would fall in 2023 while India’s would surpass it.
By 2050, the UN expects India will have 1.6 billion residents and China 1.3 billion.
A growing working-age population is an important source of economic growth, so India’s emergence will give it new power in international politics, Okumara said.
Moreover, decoupling between the US and China and the rebuilding of technology supply chains to exclude China benefits India. Apple is building iPhone 14s in India.
Natarajan Chandrasekaran, chairman of Tata Sons, has talked of plans to produce semiconductors in the subcontinent.
In March, India will host the plenary session of the Trilateral Commission for the first time. This year, it is also chairing the Group of 20, a role that will involve a leaders’ summit and many ministerial meetings. The Modi government will be eager to show leadership ahead of India’s own elections in 2024, Okumara wrote.
“The new year thus could mark the beginning of a tripolar world, involving the US, China and India. New Delhi is undeniably on the rise,” Okumara concluded.
Challenges, however, are mounting for India’s economy with the GDP forecast at a half-century low.
Motilal Oswal Financial Services forecast in a note that after growing strongly for two consecutive years, India’s real GDP growth would decelerate to 5.2 per cent YoY in FY24, while nominal GDP growth would weaken even sharply to 7-7.5 per cent, led by easing inflation.
A combination of factors such as slower global economy, fading pent-up demand and normalising base effects would contribute to slower real growth.
With an expected retail inflation print at just 4.3 per cent and a mere 1 per cent growth in the wholesale price index (WPI) in FY24, the GDP deflator could be around 2 per cent, dragging down India’s nominal GDP growth to the lowest level compared to any year between the early 1970s and FY19 (that is, half-a-century pre-Covid period), the report said.