The economy is likely to have grown at 5-5.1 per cent in the October-December 2022 quarter due to normalising base, much lower than the 6.3 per cent growth recorded in the previous quarter, according to analysts.
Normal base refers to the comparable figure of the corresponding period of the preceding fiscal. But the base is lowered for calculating growth rate when the previous numbers are not comparable due to certain extreme conditions. Compared to the pre-Covid number, the GDP is likely to have grown 11.6 per cent in Q3 from 7.6 per cent in the previous quarter, boosted by continued recovery in the services sector, said Aditi Nayar, chief economist and head of research at Icra Ratings.
On the other hand, Rahul Bajoria, head of British brokerage Barclays India, said the economy would have grown at a tad lower at 5 per cent in the October-December quarter of FY23. The government is expected to release the third quarter macroeconomic data on February 28. The government expects the economy to close the current fiscal with 7 per cent or higher growth. “Economic activity in Q3 remained distinctly uneven, amid the upsides offered by robust demand for contact-intensive services and upbeat festive season sentiment. Trends in government spending were disparate, with a healthy revenue spending by the Centre amid a base effect-led contraction in capital spending.
“Similarly, while services exports jumped 25 per cent, non-oil merchandise exports contracted by 8.2 per cent in the quarter. The advance estimates of kharif production, too, indicate a mixed trend in crop output, with rise in sugarcane, cotton, coarse cereals and oilseeds, and a decline in rice and pulses. Amid continuing input price pressures for certain sectors, we project GDP to have grown 5.1 per cent in Q3,” Nayar said. The rise in gross value added at basic prices is likely to have moderated to 4.9 per cent in Q3 from 5.6 per cent in Q2. While growth in services would display a base effect-led moderation (to 7.4 per cent from 9.3 per cent, respectively), it would outpace the rise in agriculture, forestry and fishing (4 per cent) and industry at 1 per cent, she said.
The performance of 12 of the 14 high-frequency indicators of the services sector is likely to have worsened in Q3 over Q2, on a normalising base, even as some contact-intensive sectors performed to the close above the pre-pandemic levels in Q3. Growth of the combined revenue expenditure of 22 states eased to 5.4 per cent in Q3 from 15.9 per cent in Q2. However, led by higher subsidies, especially of fertilisers, the Centre’s non-interest revenue expenditure expanded 13.4 per cent in Q3 after a 1.4 per cent contraction in Q2. Overall, the agency projects GVA (gross value added) growth of the services sector at 7.4 per cent in Q3.
Investment activity was buoyant in Q3 with an improved performance of several investment-related indicators relative to Q2, such as the output of capital goods (8.8 per cent from 6.9 per cent) and infrastructure/construction goods (7.3 per cent from 5.3 per cent) and the value of new project announcements (to a three-quarter high of Rs 6.6 lakh crore in Q3 from Rs 4.4 lakh crore in Q2). Meanwhile, Barclays India head Bajoria in a report said GDP is likely to have grown at 5 per cent in the third quarter on-year, but on a sequential basis, GDP is likely to have grown faster than Q2 as several sectors, especially high-contact services are moving towards a full reopening.
“Our 5 per cent growth forecast implies a full calendar year growth of 6.9 per cent, and the fiscal year growth of 7 per cent as high-frequency indicators are looking pretty strong in Q1 of 2023/Q4 of FY23, he said, adding that the economy continues to do well in key services and agriculture sectors on the domestic front, while manufacturing remains the only area with visible weakness. “For FY24, we continue to expect a soft landing as tighter monetary conditions and still-elevated inflation take a toll. We continue to see growth moderating to 6 per cent and forecast steady GDP growth of 6.5 per cent in FY25, Bajoria said.
