India GDP Q1 2023

India: GDP growth gains pace in final quarter of FY 2022

GDP growth gathered pace to 6.1% year on year in January–March, from 4.5% in October–December 2022. The reading means that GDP grew 7.3% over FY 2022 (April 2022–March 2023), overshooting market expectations.

The upturn was driven by public investment and spending. Public spending rebounded, growing 2.3% in January–March (October–December: -0.6% yoy). Meanwhile, fixed investment growth improved to 8.9% in January–March, from the 8.0% increase in the previous quarter, supported by the government’s capex push. Household spending was more lackluster, growing 2.8% year on year in January–March (October–December: +2.2% yoy).

On the external front, exports of goods and services growth improved to 11.9% in January–March (October–December: +11.1% yoy), showing resilience in the face of a slowing global economy. Conversely, imports of goods and services growth waned to 4.9% in January–March (October–December: +10.7% yoy), marking the weakest reading since Q4 2020.

GDP grew 2.2% in seasonally adjusted quarter-on-quarter terms in January–March (October–December: +0.4% qoq s.a.), according to an unofficial estimate by Nomura.

Our panelists expect GDP growth to remain roughly stable in April–June, likely buoyed by solid services activity. Moreover, the Reserve Bank of India appears unlikely to hike any further, which bodes well for domestic demand. A downside risk is posed by the external sector, as the downturn in the global economy continues to sap export demand. Moreover, the El Niño weather phenomenon could disrupt agricultural output.

Analysts at Nomura commented on the short-term GDP outlook:

“The coincident growth indicators as of early Q2 paint a mixed picture. Data for April suggests healthy consumption (wholesale auto, diesel sales), services and investment growth. There was an uptick in new investment projects (CMIE) as of Q1 2023, but the increase is largely driven by the transport sector. On the other hand, early indications for May suggest that passenger vehicle demand is subdued for small cars and concerns are growing for MHCV sales.”

Analysts at the EIU commented on the GDP outlook for the present fiscal year:

“We forecast that real GDP will grow by 6.2% in 2023/24, driven by strong services growth and continued capital investment by the government. Some loss of growth momentum compared to 2022/23 will manifest from a moderation of consumption demand and exports, as well as a slowdown in agricultural growth. In addition, a lack of traction in private investment will continue in 2023/24.”

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