The bank in a report said that the downward revision is mostly to do with our Q1GDP estimate that was at 15.7 per cent
The State Bank of India on Thursday revised India’s annual gross domestic product (GDP) growth for the financial year (FY) 2023 to 6.8 per cent, a large part of which is a statistical adjustment with growth momentum likely to show an increasing momentum in the second half of the current fiscal. The bank in a report said that the downward revision is mostly to do with our Q1GDP estimate which was at 15.7 per cent.
It said that the lower growth in Q1 also compounds RBI’s job, with a rate hike trajectory in the next two MPC meetings trying to find a neutral ground amidst growth and inflation. The Indian economy grew by 13.5 per cent in Q1 FY23 with the services sector showing a strong rebound and GVA grew by 12.7 per cent.
Though GDP grew in double digits still it came way below the market expectations. The primary culprit was the growth in the manufacturing sector which grew by a measly 4.8 per cent in Q1, the bank said. Nominal GDP growth came at 26.7 per cent YoY in Q1 FY23 compared to 32.4 per cent in Q1 FY22 and 14.9 per cent in Q4 FY22, with the share of private final consumption expenditure increasing in overall growth.
Its weighted contribution has increased to 21.9 per cent in Q1 FY23 from 7.5 per cent in Q4 FY22 and 14.2 per cent in Q1 FY22, thereby revealing its relative importance in GDP growth. “Notably, private final consumption expenditure in real terms had improved to 10 per cent above the pre-pandemic level in Q1FY23,” according to the bank.
It also said that on the expenditure side the picture has improved considerably. Private consumption has improved on the back of good urban demand with a growth of 25.9 per cent. Urban demand is getting support from contact-intensive services while rural demand has not responded to robust agriculture output growth. Gross fixed capital formation registered a growth of 20.1 per cent.
The new project announcements by the private sector in June 2022 as per Centre for Monitoring Indian Economy (CMIE) data also rose to 117 per cent of the pre-covid level (June 2019) suggesting healthy momentum. “A lot should depend on emerging inflation prints locally, but if the message from Jackson Hole summit is a harbinger, US seems bracing for further hardening at an elevated pace, with Fed chair also questioning the sustainability of growth and job markets going head, whose robustness has shielded the economy largely, of late,” the bank said.
On the other hand, the Eurozone seems to enter a conflict zone, accentuated by political melodrama in select jurisdictions, even as inflation promises to further spiral up with Russia likely to squeeze gas supply during the ensuing winter to exert tacit pressure on the block, it said.