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Bangalore: India posted economic growth of 6.3% in its July-September quarter, much lower than the 13.5% growth reported in the previous three months due to distortions caused by the COVID-19 lockdown in Asia’s third-largest economy.
Government capital spending rose more than 40% in the quarter as the federal government boosted spending on infrastructure from roads to railways, according to official data on Wednesday.
Growth was above the 6.2% forecast by economists in a Reuters poll for the second quarter of India’s 2022/23 fiscal year.
commentary
Madhavi Arora, Chief Economist, MK Global Financial Services, Mumbai
“Second-quarter GVA (gross value added) growth slowed to an expected 5.6%, led by growth in the services sector while manufacturing was a big drag.
“Going forward, even a recovery in domestic economic activity still depends on broad-based, protracted global drag, shrinking corporate profits, monetary policy demand-side restraint and reduced global growth prospects.
“This will put pressure on domestic growth, which still lacks the next lever of secular growth. We see downside risks increasing to our 7% growth forecast for FY23.”
Sujan Hazra, Chief Economist, Anand Rathi, Mumbai
“GDP growth was expected to decelerate due to both asymmetric base effects and sharp slowdown in exports in the last quarter. We expect the growth slowdown to continue for the rest of the current fiscal year.
“Services on the supply side and investment on the demand side will continue to be the main drivers of growth, while industry and consumption and net exports will be the main drag.
“Despite the slowdown, we expect India’s GDP growth to be around 7% currently and 6-6.5% in the next financial year. Fiscal and fiscal consolidation bias will continue in India this year. Both policies are likely to moderate in the coming year as inflation and growth cool.”
Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities, Mumbai
“GDP growth at 6.3% in 2QFY23 was in line with our expectations of 6.2%. Domestics indicated considerably weaker growth in the industrial sector, led by a recovery in manufacturing and communication-based services, while growth in the services sector remained stable.”
Aditi Nair, Chief Economist, ICRA, Gurgaon
“Q2 FY23 GDP growth of 6.3% was similar to our estimate of 6.5%, even as GVA growth of 5.6% beat our forecast (6.3%) by a wide margin, led by an unexpected contraction in manufacturing reflecting the impact of higher input prices on margins in certain sectors.
“We maintain our real GDP growth estimate for FY2023 at 7.2%, although the deepening of the external slowdown poses a risk.”
Sakshi Gupta, Chief Economist, HDFC Bank, Gurugram
“As expected, services activity was the main driver of growth, while manufacturing GDP contracted. On the demand side, private consumption’s share of GDP fell – a signal to the fragility of the consumption recovery seen in Q1 as the pent-up demand effect faded and higher inflation hit consumer spending.
“Going forward, both export growth and consumption could present downside risks to the GDP outlook. We expect H2 FY23 growth to be 4% to 4.5% and full-year growth to be 6.8%. For FY24, growth is expected to moderate to a further 6% as global headwinds pick up.
“This GDP print does not change our view that the Reserve Bank of India (RBI) may raise rates by 35bps, taking the policy rate to 6.25% in its December meeting.”
Garima Kapoor, Economist, Institutional Equities, Ilara Capitals, Mumbai
“Even as domestic growth drivers remain strong on the services side, weakening global demand amid tightening financial conditions remains a key risk to the growth outlook for India in the near term. We see India’s FY23 GDP growth at 7.1% and FY24 GDP growth at 6%.”
Devendra Pant, Chief Economist, India Ratings, Mumbai
“The slowdown in GDP growth in 2QFY23 was in line with expectations. Favorable base effects are gradually eroding, with high inflation and weak demand – both domestic and external – weighing on GDP growth.
“GDP growth is expected to decelerate further in the second half. Unless inflation is under control and global demand recovers, it will be difficult to sustain high growth.”
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