India’s economy grew faster at 5.1% in Q4: Economists

India’s economy likely grew better than expected in the March qualter of FY23, which could push full fiscal year growth higher than January’s 7% first advance estimate.

An ET poll of 20 economists pegged growth in the Janua1Y-March period in the 4.1-5.7% range with the median at 5.1%, higher than the 4.4% recorded in the preceding quarter.

“In Q4 FY 23, the strength in domestic consumption demand is supporting the growth,” said Rajani Sinha, chief economist, CareEdge. The fourth quarter numbers and second advance estimate for FY 23 will be released on May 31.

 

 

“Q4FY23 GDP growth is expected at 5.1%, suppoltecl by the service sector, in particular trade hotel and transportation and government sewices with a pick-up in state government expenditure,” said Gaura Sengupta, economist, IDFC First Bank.

 

DBS Bank senior economist Radhika Rao said, “Most lead indicators that we track proved to be resilient in the March quarter, including vehicle registrations, e-way bill volumes, steel consumption, etc., besides revival in rural demand.”

 

“Monthly information from the index of industrial production shows manufacturing activity remained weak in the export-oriented sectors of textiles, pharmaceuticals, leathers,” said Rahul Bajoria of Barclays.

 

The external sector also provided some boost as the net trade balance improved on the back of a rise in service exports. “The imports of goods and services contracted 1.3% year on year (YoY) in Q4, FY 23 for the first time in eight quarters which along with a positive YoY growth of 7% in overall exports would mean that net trade balance (which has been traditionally negative) would be cutting off less from the GDP (than anticipated earlier),” according to Paras Jasrai, senior analyst, India Ratings and Research.

 

Ind-Ra projects growth to be lower at 4.1% in the fourth quarter. Economists saw a slowdown in investment by the private sector.

 

“Fresh capex commitments by the private sector were likely on the slow lane, as new investment intentions were largely flat if one excludes a large order by a domestic airline in the quarter, just as firms also faced tightness in financing conditions,” Rao said. “Investment is expected to get some supp01T from the government in this period as states rush to complete capex targets,” Jasrai said. “Investment is expected to get some support from the government in this period as states rush to complete capex targets,” Jasrai said.

 

FY24 outlook
The economists predict growth to slow in FY 24 as global conditions weigh down the economy. 

“In FY 24, we expect the growth to moderate, in part, due to normalisation of base effect,” Sinha said. “Slowdown in external demand and some waning of pent-up demand will also result in growth moderation.”

 

India is expected to retain its tag of the fastest-growing major economy. The International Monetary Fund (IMF) has forecast 5.9% growth while the RBI sees a higher 6.5% rise.

“Some drag to growth is expected from weaker manufacturing and slowing exports given external headwinds, but we think robust domestic demand is anchoring economic growth,” Bajoria said.