Economy slows to 4.4 per cent in Q3, govt’s full-year target intact

NEW DELHI: India’s economic growth, as measured by the gross domestic product (GDP), slowed to 4.4 per cent in the October-December quarter of 2022-23 against 6.3 per cent and 13.5  per cent in the second and first quarters, respectively. The deceleration was driven by a combination of factors including the continued weakness in the manufacturing sector, muted consumer demand and base effect because the National Statistics Office (NSO) revised 2021-22 GDP growth to 9.1 per cent from 8.7  per cent estimated earlier. 

The manufacturing sector’s output, going by the gross value added in the third quarter of 2022-23, shrank 1.1 per cent compared with a growth of 1.3 per cent in the year-ago period. In this fiscal's second quarter, the sector contracted by 3.6 per cent. In addition, trade, hotels, transport, communication and services grew at a slower pace of 9.7 per cent in the third quarter against 15.6 per cent in the second.

Although the latest figures signalled the economy is powering down, the NSO’s second advance estimates retained GDP growth for the current fiscal at 7 per cent, the same rate projected in the first advance estimates released in January. 

Terming the 7 per cent growth forecast ‘very realistic’, chief economic advisor V Anantha Nageswaran said the economy will have to expand 5-5.1 per cent in Q4 for this to happen. “The trends... indicate that achieving that growth rate in Q4 is well within the realm of possibility and, therefore, the 7 per cent real GDP growth estimate for 2022-23 is very realistic,” Nageswaran told reporters. 

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However, economic shocks from bad weather conditions or any other unexpected events could spoil the math. A government statement put the size of the GDP at constant (2011-12) prices in Q3 2022-23 at Rs 40.19 lakh crore, against Rs 38.51 lakh crore in the year-ago period — showing a growth of 4.4 per cent. “GDP at current prices in Q3 2022-23 is estimated at Rs 69.38 lakh crore, as against Rs 62.39 lakh crore a year ago, showing a growth of 11.2 per cent,” the statement read. 

The Reserve Bank of India had lowered the country’s growth projection to 6.8 per cent from 7 per cent amid the tightening of global financial conditions and geopolitical tensions. Meanwhile, the IMF has projected a growth of 6.8 per cent for FY23. 

According to experts, the third quarter GDP growth decline was driven by both domestic and external factors. “Global demand slowdown had already begun to hurt India’s export and industrial growth,” said Dipti Deshpande, principal economist, CRISIL.

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FIGURES THAT MATTER

Core sector performance

7.8 per cent Core sector growth in January came in at 7.8 per cent, up from 7 per cent recorded in December on the better show by coal, fertiliser, steel and power segments

Fiscal deficit

The Centre’s fiscal deficit touched 67.8 per cent of the full-year target in January due to higher expenses and lower revenue realisations

GDP dynamics

GDP growth for 2021-22 was revised upwards to 9.1 per cent from 8.7 per cent estimated earlier

India needs to grow at 5-5.1 per cent in Q4 to achieve a 7 per cent real GDP growth rate for the full financial year