A pickup in services sector growth led by construction, and trade, hotels, transport sectors along with higher investment supported growth even as private final consumption expenditure registered a muted growth.

India’s GDP in FY23, however, will be lower than the growth rate of 9.1 per cent in 2021-22. Sequentially, in quarterly terms in 2022-23, the economy grew 13.1 per cent in April-June (earlier 13.2 per cent), 6.2 per cent in July-September (earlier 6.3 per cent), 4.5 per cent in October-December (earlier 4.4 per cent).

Agricultural growth was estimated at 5.5 per cent in Q4 as against 4.1 per cent in the year-ago period and 4.7 per cent in the previous quarter. Manufacturing growth rebounded to a year-on-year growth of 4.5 per cent in Q4 FY2023 after having contracted in each of the previous two quarters. For the full year though, revisions for the previous quarter ensured manufacturing growth being estimated now at 1.3 per cent for FY23 as against 0.6 per cent earlier. Experts said the uptick in manufacturing reflects growth in volumes as well as an improvement in margins during the fourth quarter, partly on account of a sustained moderation in input costs.

Prime Minister Narendra Modi in a tweet said the 2022-23 GDP growth figures “underscore the resilience of the Indian economy amidst global challenges”. “This robust performance along with overall optimism and compelling macro-economic indicators, exemplify the promising trajectory of our economy and the tenacity of our people,” he said.

Commenting on the GDP data, Chief Economic Adviser V Anantha Nageswaran said the revised numbers to be released next year for FY23 could push the GDP growth further beyond 7.2 per cent. “I think I can stick my neck out and say that when the revised numbers for FY23 are released next year, there might be an upward revision to the 7.2 percent GDP growth figure,” he said.

He also said that private consumption, which showed a 2.8 per cent growth during the fourth quarter and a 7.5 per cent growth in FY23, as a percentage of GDP stood at a 16-year high in 2022-23. “Double-digit growth in tractor sales bodes well for the agriculture sector. Capacity utilisation has already crossed 75 percent in several sectors. Private sector capital formation is beginning to unfold…total employment in the hotel industry was 40 million before the pandemic. This fell to 29 million during the pandemic but has now increased to 45 million,” he said, adding that inflation is seeing a downward trend and there is a very high chance CPI inflation returning to the Reserve Bank of India’s mid-point of 4 per cent of its medium-term target of 4+/-2 per cent in 2023-24.

He further said that there are indications of strong recovery in rural demand, adding that those who had migrated to rural India, will return to urban India, and therefore, income transfers to rural India should also happen. “So, we are confident that private final consumption expenditure in 2023-24 will be respectable,” he said.

On an industry basis, services growth remained strong, with trade & transport, financial services, and construction activity showing strong growth. Construction sector grew 10.4 per cent in January-March as against 4.9 per cent a year ago, while ‘trade, hotels, transport, communication & services related to broadcasting’ recorded a growth of 9.1 per cent in Q4 as against 5.1 per cent a year ago. “Services sector remained strong…the upside was driven by strong output in agriculture and construction activity, while public sector spending was generally modest, pushing up non-governmental economic activity. Manufacturing output rose after two quarters of contraction, although slower global demand is likely to continue to affect India’s manufacturing and export growth. Some support to manufacturing may be expected from falling input costs. In terms of primary activity, agriculture and mining showed robust increases, but the bulk of the growth in India still appears underpinned by services,” Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays said.

The GDP data also reveals that net exports, through a sequential increase in exports and decrease in imports, actually helped add to the headline growth figure by as much as about 1.4 percentage points. “A closer look though suggests that higher provisional GDP growth of FY23 than second advance estimate has primarily been driven by higher exports and lower imports in Q4FY23. As a result, the net exports dropped from Rs (-) 975.1 billion in Q3FY23 to Rs (-) 62.6 billion Q4 FY23. This also helped the Q4 FY23 GDP to come in at 6.1%, much higher than Ind-Ra’s expectation of 4.1%,” Sunil Sinha, Principal Economist, India Ratings and Research said.

Also, the Q4 GDP figure of 6.1 per cent came in lower than 6.5 per cent growth in Gross Value Added (GVA) terms, indicating higher subsidies outgo in the last quarter. GDP is GVA plus net product taxes (taxes – subsidies).

Going ahead, however, pressure on exports growth and consumption demand will weigh on growth prospects. “A higher growth number than expected at 7.2% will put pressure on growth performance in Fy24 which we project at 6-6.5%. The phenomenon of pent-up demand will not be strong and private sector investment has to pick up this year. Hence the two engines that need to fire would face that much more pressure given that exports will not be contributing to growth this year. Therefore, under conditions of a global slowdown, maintaining growth at 6% plus will be challenging. The monsoon prospects which will also affect rural demand will be one aspect that will deserve attention,” Madan Sabnavis, Chief Economist, Bank of Baroda said.