GDP growth records slowest increase in a year in January–March

GDP growth waned to 7.8% year on year in January–March (October–December FY 2023) from 8.6% in October–December. January–March's reading marked the softest growth in a year but exceeded market expectations. The reading means GDP grew 8.2% over FY 2023 as a whole, up from FY 2022’s 7.0% and the 5.8% FY 2013–2022 average.

Private consumption growth was stable at 4.0% year on year in January–March compared to October–December. Government spending bounced back, growing 0.9% in January–March (October–December 2023: -3.2% yoy). Meanwhile, fixed investment growth fell to 6.5% in January–March, marking the worst reading in a year (October–December 2023: +9.7% yoy). On the external front, exports of goods and services growth accelerated to 8.1% year on year in the first quarter, which marked the best reading in a year (October–December 2023: +3.4% yoy). Conversely, imports of goods and services growth softened to 8.3% in January–March (October–December 2023: +8.7% yoy).

Aurodeep Nandi and Sonal Varma, research analysts at Nomura, said: “In the near term, the absence of broad-based private consumption and capex recovery, ebbing terms-of-trade tailwinds for firms and macroprudential tightening by the RBI are potential drags. However, structural positives include the strong focus on public capex (assuming political continuity at the Centre), continued reforms momentum, prioritisation of macro stability, favourable demographics and opportunities from friendshoring. We revise up our FY25 GDP growth to 6.9% (vs our previous estimate of 6.6%).”

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