As per First Advance Estimates (AE)
of National Income released by National Statistical Organisation (NSO), India’s
real GDP and GVA growth for FY23 are projected at 7.0% and 6.7% respectively. While
the projected GDP growth stands a tad higher than that of RBI, it is in line
with the existing forecast of Acuité Ratings which remains pegged at 7.0%.
- FY23 estimated
growth marks an expected deceleration vis-à-vis 8.7% and 8.1% of real GDP and
GVA growth clocked in FY22 – a year marked by onset of post pandemic recovery
and further aided by a favourable base.
GDP, which becomes a critical input for Budget arithmetic, is projected at Rs
273.1 lakh cr – translating into annualised growth of 15.4% compared to 19.4%
in FY22. Against the budgeted growth of 11.1%, this growth upside gives the
Government an added fiscal headroom of nearly Rs 95000 cr in FY23 (or 30 bps cushion
to FY23 fiscal deficit to GDP ratio of 6.4%).
H1 FY23 GDP growth estimated at 10.7%YoY, the First Advance Estimates imply a
growth of 4.5% in H2 FY23. This marks a sharp slowdown – an outcome primarily due
to a wind down of the earlier favourable statistical base, even as incremental
quarterly growth momentum remained resilient in Q3 FY23 amidst reopening
dynamics and festive season support.
- On the
sectoral side, the slowdown in FY23 has been led by industry, of which mining
and manufacturing played an outsized role. After clocking a robust double-digit
value-added growth of 10.4% in FY22, industry is projected to slow down to 4.1%
in FY23. Weighing on the headline industry growth, mining and manufacturing are
expected to decelerate to 2.4% and 1.6% respectively.
- On the
other hand, cushioning the downside, growth in electricity & utility
services is estimated to improve to 9.0% from 7.5% in FY22, while construction
is expected to hold ground at 9.1% compared to 11.5% in FY22.
sector is projected to grow at a 3-year high of 3.5% compared to 3.0% in FY22,
premised on a healthy start to rabi sowing.
are expected to outperform industry in FY23, benefitting from complete
reopening of the economy. Growth in the sector is estimated at 9.4% in FY23, further
building on the 8.4% expansion recorded in FY22. Expectedly, sub-sector of
Trade, hotels, transport and communication which comprises of several
contact-intensive services leads the charge with projected double-digit
expansion of 13.7% in FY23, outpacing its own growth of 11.1% recorded in FY22.
on services, growth in public administration, defence and other services is estimated
to slow to 7.9% from 12.6% in FY22.
- On the
expenditure side, the expected slowdown in investment growth to 11.5% in FY23
from a decadal high of 15.0% in FY22, also weighs on the headline GDP growth
along with net exports.
in FY23, i.e., combining both private and government, is projected to expand at
the same pace of 7.0% recorded in FY22. While private consumption is estimated
to see marginal downside from 7.9% in FY22 to 7.7% in FY23, it is set to be
completely offset by an uptick in Government consumption.
exports, amidst strength in domestic demand and in turn imports along with
weakening global demand, is estimated to shave off 2.3% of GDP in FY23.
Looking back, FY23 has been a fairly challenging
economic year amidst lingering geopolitical uncertainties, aggressive global
monetary policy tightening, commodity price flare-up in H1-2022 and growing
echoes of an impending global slowdown in H2-2022. Against these global
headwinds, domestic economy activity continued to hold on to its strength, gaining
from a fully reopened economy and the first normalised festive season in 3
years that particularly supported the services sectors i.e. trade, transport
Numerically, FY23 was also the year, when Covid
induced loss in economic output was fully recovered. Estimated headline GDP for
FY23, stands 8.6% above pre-Covid levels of FY20, with a broad-based recovery
seen across all sub-sectors. Having said so, recovery still has an uneven
characteristic, as underscored by FY23 Trade, Hotels, Transport and
Communication services GVA projected to be a meagre 0.8% above FY20 levels.
Recall, first advance estimates of GDP are based on
extrapolation of limited data available for the first 7-8 months of the fiscal
We believe that there could be a marginal downside to
NSO’s GDP estimate of 7.0% on two fronts –
growth slowdown will have a more material impact on domestic growth impulse in
with the lagged impact of domestic monetary policy tightening seen in FY22
Nevertheless, we have held on to our FY23 GDP growth
forecast of 7.0% given the robust recovery in the service sector and the
headwinds from a further growth in capital expenditure in H2FY23.
Table 1: India’s GVA and GDP: Sectoral break-up