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Q1FY23: India’s GDP looks up, expects a double digit growth

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India is likely to report double-digit economic growth in the first fiscal quarter, on the back of the base effect, consumption boost, and demand improvement, analysts suggest. 

As estimated by analysts, the nation’s GDP in the April-June quarter grew as much as 16% on the year, as the economy staged a full recovery from Covid-led restrictions. 

A report by SBI research expects a 15.7% on-year jump in India’s GDP in the first quarter. “Growth is expected to be about 15.7% with a huge possibility of an upward bias on account of various indicators showing good progress in the Indian economy,” it said. 

Estimates by Barclays also show India’s economic growth to have accelerated to 16% on year in the Apr-Jun quarter. As per the firm, India’s economy is to show a full recovery from COVID in the quarter under review, with the services sector fully open, trade activity at a peak, and domestic demand holding strong. 

The robust sequential recovery in place since Q1FY21, when COVID-19’s Delta variant forced widespread lockdowns, likely hit another high in Q1FY23, said analysts Rahul Bajoria and Virinchi Kadiyala in the report. “The economy was fully opened, with all activity restrictions removed. While some supply headwinds were evident in the form of lingering intermediate-good shortages and higher input costs, we expect both the domestic goods and services sectors to show impressive recoveries in the first quarter,” they added.

Analysts expect the net exports likely to be a drag due to high crude oil prices in Q1. 

Looking at the growth rates India is expected to report the fastest pace of growth in a year during Q1

A Reuters poll of 51 economists estimated a 15.2% surge in economic output, faster than the 4.1% growth rate in the preceding quarter. If realized, this will also be the fastest pace of growth in a year. 

ICRA also suggests a double-digit GDP growth in India in the first quarter of the current fiscal. It estimates the growth at 13% owing to a low base and robust recovery in the contact-intensive sectors following the widening vaccination coverage. “The anticipated double-digit GDP expansion in Q1 FY2023 benefits from the low base of the second wave of Covid-19 in India in Q1 FY2022 as well as the robust recovery in the contact-intensive sectors following the widening vaccination coverage,” said Aditi Nayar, Chief Economist, ICRA.

Going ahead India’s GDP growth looks optimistic. As per Acuité Ratings & Research, India’s GDP growth in Q1 FY23 is likely to register at 15%-16% on an annualized basis amidst support from a favorable statistical base due to the adverse impact of the disruptive Delta Covid wave in the previous year along with continued recovery in the services sector aided by pent-up demand, especially in sectors such as tourism, hospitality. Further aiding the growth is normalized personal mobility and expansive vaccination coverage. 

Our Acuité Macroeconomic Performance index (AMEP) index provides mixed signals on economic growth in the current fiscal; beyond the base factor, the double-digit annualized growth nos for most macro indicators reflect resilience and a gradual pickup in the services sector as well as domestic private consumption despite inflationary headwinds and the global slowdown. This makes us optimistic about a GDP growth print of over 7.0% in FY23. On the other hand, a few high-frequency indicators such as rail freight, exports, and diesel consumption have shown a lack of steady and sustainable momentum, leading to moderate downside risks to that forecast.”

~ Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research

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