Kolkata: In sync with broader market sentiments at lower end of spectrum, GDP grew 4.4% during Q3 FY23, softer than 13.2% growth in Q1 and 6.3% growth in Q2 exhibited earlier, according to Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.
He said for the full fiscal, GDP growth is expected to increase by 7.0% and GVA growth by 6.6%. Based on the FY23 yearly numbers, Q4 GDP growth should be coming around 5.1%, based on an unchanged base. Revisions across board in both yearly and quarterly growth numbers of recent past have seen real GDP growth for FY20, FY21 and FY22 being revised upwards by 20, 77 and 42 bps, respectively.
Dr Ghosh said the huge revisions in FY21 GDP growth are primarily due to substantial upward revisions in manufacturing growth (+351 bps) and construction (+239 bps). This indicate that manufacturing and construction sectors pandemic impact was not as significant as believed earlier.
In rupees terms, the revision accounted for an increase of RsRs. 98,000 crore in these sectors combinedly. However, seasonally adjusted real GDP growth series show modest dip in economic momentum, with decline in growth at -0.7% qoq in Q3 FY23 compared to 1.2% qoq in Q3 FY22 and -2.1% qoq in Q2 FY23, he said.
Additionally, disaggregated credit growth data for January 2023 shows a large sequential dip to around Rs. 37,300 crores, against a Rs. 3.5 trillion growth in December. Are these early indications of a slowdown against a spate of rate increase and global uncertainties? Dr Ghosh questioned.
There are large revisions in the quarterly number of FY21 with GDP growth of Q2, Q3 and Q4 FY21 revised upwards by more than 90 bps. However, GDP growth of Q3 and Q4 of FY22 are revised downwards. In respect of current fiscal, the Q1 FY23 GDP growth was revised downwards by 32 bps. Due to upward revision in FY22 GDP numbers (by 42 bps), the fiscal deficit of FY23 as % of GDP will now be revised upwards to 6.5% from 6.4% of GDP. For FY24, there will be no change in fiscal deficit due to revisions. The sectoral GVA indicate that all the sectors have crossed the pre-covid level!, he said.
Dr Ghosh said sector-wise, Agriculture & Allied activities accelerated by 3.7% in Q3 FY23 (2.3% Q3 FY22), manufacturing grew by 2.4% (1.6% in Q3 FY22 though it had declined by 0.4% in preceding quarter i.e. Q2 FY22) while services embraced growth of 6.2%. The sluggish growth in manufacturing came primarily due to decline in manufacturing sector (-1.1%) though Electricity, gas, water supply & other utility services and construction sector grew by more than 8% during the quarter. ‘Public Administration, Defence and Other Services’ under services had a moderate growth of 2% while ‘Financial, Insurance, real estate & professional Services’ share showed increasing trend with higher growth compared to other 2-sub sectors (trade, hotels and public administration).
With the GoI’s continuous and tacit efforts to ensure quality of life for all citizens and stoppage of leakage of benefits through DBT, the per capita GDP at current prices is estimated at Rs. 1,96,716, compared to Rs. 71,609 in FY12, indicating an impressive CAGR growth of 10.6%. The jump in per capita GDP in FY23 is Rs. 25,218 at current prices, he said.
Dr Ghosh said there is also good news on private final consumption expenditure/PFCE expected to increase to Rs 164 lakh crore in FY23, with the yearly growth moderating to 14.8%. Historical data shows that it declined at current price for the first time in FY21 in a decade. Prior to Covid it continued to grow at double digits (average of 12%) though the pace of increase has been on the decline since FY18 and it turned negative in FY21. The growth rate in PFCE has moved back to double digits post Covid, indicating the positive growth momentum.
Per capita PFCE also shows an improvement of over 10% yoy to Rs. 63,595 crore in FY22 after dipping to Rs. 57,728 crore in FY21. Meanwhile, Gross Capital Formation in Agriculture, Manufacturing, Electricity, Trade & Hotels, Real Estate, Public Administration and Other Services sectors registered new peak in FY 22 after dipping during pandemic. The trends in GCF to gross output ratio or the plough back of funds for creation of fresh capacity shows no specific trend, except for public administration where the ratio attained fresh peak in FY22 owing to emphasis on capital expenditure in recent budgets, he said.
“We end with an anecdote. Unpaid domestic work is an important aspect of productive activities and an indispensable factor that contributes to the well-being of household and economy. However, the predominance of women in domestic work and keeping them out of ‘economic activities’ put unpaid domestic work under the shadow of invisibility, outside the production boundaries, and further outside the purview of economic policy. To understand the status of women in the labour market, it is necessary to comprehend the nature of their unpaid work, which has significant impact on their work participation rate in the economy. Our analysis indicates that the total contribution of unpaid women to the economy is around Rs. 22.7 lakh crore (Rural: Rs 14.7 lakh crore and Urban: Rs 8.0 lakh crore) which is almost 7.5% of the India’s GDP,” Dr Ghosh said.
“We are also not overtly concerned regarding the recent news of El Nino. Looking at the relation between El Nino and Indian droughts since 1950, it is observed that India faced 13 droughts, and 10 of these were in El Niño years and one in a La Niña year. This indicates that there may not be a one-to-one correspondence between El Niño and Indian droughts and the recent fears seem misplaced.
It looks that FY24 GDP growth is likely to be higher than the threshold 6%,” he added.