After a gap of two years, the Indian economy will show a meaningful expansion, as the real GDP in FY23 will be 9.1% higher than the FY20 (pre-Covid level) GDP level, India Ratings said
India Ratings and Research (Ind-Ra) on Thursday said it expects India’s GDP to grow 7.6% in FY23.
After a gap of two years, the Indian economy will show a meaningful expansion, as the real GDP in FY23 will be 9.1% higher than the FY20 (pre-Covid level) GDP level, the report said.
“However, the size of the Indian economy in FY23 will be 10.2% lower than the FY23 GDP trend value. A continued weakness in private consumption and investment demand is estimated to contribute 43.4% and 21.0%, respectively, to this shortfall.”
However, if the impact of Omicron on fourth quarter growth turns out to be greater than Ind-Ra’s estimate, then there could be some upside to the FY23 growth originating from the base effect.
Nonetheless, India Ratings said there are risks to the ongoing recovery.
NSO advanced estimate of FY22 shows that private final consumption expenditure (PFCE), which is the largest component of GDP (58.6%) from the demand side and a proxy for consumption demand, grew only 6.9% yoy in FY22, despite a low base and sales data of many consumer durables showing robust growth, the report said.
Tha agency said this indicates that the consumption demand is still weak and not broad based. In fact, the slowdown in PFCE had begun even before the Covid-19 pandemic had hit the Indian economy.
Robust PFCE growth is a must for a sustained growth recovery, it added.
India Ratings estimated investments, as measured by gross fixed capital formation (GFCF), to grow 8.7% yoy in FY23. By budgeting the capex at 2.5% of GDP for FY22 and scaling up capex of GDP for FY21 (RE) to 2.3%, the union government had renewed its focus on reviving growth through capex in the economy. (Mint)
