Strong growth seen in Q4 on services rebound, pvt investment

“SBI’s model, based on 30 high-frequency indicators from key sectors, and tuned/trained to project the GDP numbers forecasts the quarterly GDP growth for the Q4FY23 at 5.5 per cent. At this rate, India’s GDP growth for FY23 is likely at 7.1 per cent,” said Soumya Kanti Ghosh, Chief Economic Advisor, State Bank of India Group.

Ghosh said that there are signs of a renewed surge in resilient manufacturing while supporting services sector to embrace enhanced efficiency.

“In India, domestic consumption and investment stand to benefit from stronger prospects for agricultural and allied activities, strengthening business and consumer confidence, and strong credit growth,” he said.

A poll by Reuters last week of 56 economists, pegs Q4FY23 growth at 5 per cent. An earlier poll by the wire agency, in April, of 45 economists, pegged FY23 GDP growth at 6.9 per cent. However, most analysts now say FY23 growth will at least be 7 per cent, or could even top that. A poll of 15 analysts by digital outlet Moneycontrol sees Q4FY23 GDP growth at 5.1 per cent.

“Growth recovery remains on track with Q4FY23 GDP growth expected at 5.1 per cent YoY versus 4.4 per cent in Q3. Recovery is likely to be led by services sector with a pick-up in trade, hotel and transportation and government expenditure,” said Gaura Sengupta, India Economist and IDFC First Bank. Sengupta sees FY23 GDP growth at 7 per cent, same as the NSO’s projections.

Sengupta said that while consumption recovery continues to be supported by urban areas, the rural market is also showing nascent sign of recovery as real wage growth turns positive. She added that capex cycle recovery, which has depended on central government expenditure, got some support from a pick-up in state government expenditure and improvement in capacity utilisation by the private sector.

Capex cycle indicators showed a steady recovery with pick-up in capital goods imports (10.8 per cent YoY in Q4), steel consumption (17.1 per cent YoY in Q4), capital and infrastructure production, Sengupta said.

Last week, Reserve Bank of India Governor Shaktikanta Das said that FY23 GDP growth could exceed 7 per cent.

“According to all the recent trends, it will not be a surprise if GDP growth for last year comes above the official estimate of 7 per cent. All the economic indicators for Q4 show that economy activity sustained momentum, and in fact in all the high frequency indictors which we monitor, the momentum was maintained in Q4,” he had said.

The latest Monthly Economic Review report by the Finance Ministry stated that companies have started investing in new capacity, buoyed by sustainable growth in activity. During Q4FY23 the Centre for Monitoring Indian Economy reported the completion of projects worth Rs 60,000 crore and the announcement of new ones valued at Rs 10.9 trillion, the Ministry had stated.

Some analysts still had concerns about the spread of recovery.

“Economic activity in Q4FY23 remained uneven, with domestic demand for services outpacing that for goods and surprisingly robust exports of services amid a contraction in merchandise items,” said Aditi Nayar, Chief Economist, Icra Ltd.

Nayar said that lower commodity prices offered relief for margins in some sectors, while trends in investment activity and government spending were mixed. However, unseasonal rains are expected to have affected the rabi output of some crops, weighing upon the growth of agriculture GVA.

Quarterly GDP growth

Q1FY22	Q2FY22	Q3FY22	Q4FY22	Q1FY23	Q2FY23	Q3FY23
21.6	9.1	5.2	4	13.2	6.3	4.4

Source: mospi.gov.in | All figures in %

Investment and Consumption Share in Nominal GDP

	Q4FY22	Q1FY23	Q2FY23	Q3FY23	FY23 Second AE
Private Final Consumption Expenditure	59.2	59.2	61.7	63.3	60.5
Government Final Consumption Expenditure	11.9	11.1	9.0	9.0	10.5
Gross Fixed Capital Formation	30.5	29.1	29.1	26.8	29.2

All figures in percentage | Source mospi.gov.in | *AE: Advance Estimate