As per advance estimates released by government agencies, India's growth for the current fiscal year could be higher than what was initially expected
As certain parts of the developed world appear to be spiraling towards recession, India seems to be in a warm sport with economic growth likely to be around 7% in the current financial year. This is marginally more than what early estimates from multiple forecasts had indicated as the world stepped out of its worst season of economic inactivity led by the pandemic.
While the RBI and the International Monetary Fund (IMF) had indicated a growth rate of 6.8% for the financial year, the World Bank had pegged it marginally higher at 6.9% as against a GDP growth of 8.7% in the previous financial year. Of course, those high numbers came on top of the Covid-induced low base of the 2020-21 financial year.
NSO estimates pegs growth higher
Now, we have the early advance estimates from the National Statistical Organisation (NSO) which suggests that the nominal GDP growth without adjusting for inflation is pegged at 15.4% in the current fiscal year, sharply higher compared to 11.1% that the government had assumed while announcing its annual budget for 2022-23.
The absolute fiscal deficit is projected at Rs.16.6 lakh crore and if the economy does grow at the projected rate of 7% for the year, it could reduce the fiscal deficit gap to 6.1% as against the budget estimates of 6.4%. Economists believe that this could only mean that the recessionary headwinds and the geopolitical friction had a lesser-than-expected impact.
The NSO data further revealed that the gross value add or GVA could be pegged at 6.7% which is slower than the growth rate of 8.1% recorded in the previous financial year. On the expenditure front, private consumption growth stood at 7.7% while investments as a measure of gross fixed capital formation was 11.5%.
Investment rates give out strong cues
The investment rates are expected to rise to around 29.2% of GDP as against 28.6% of GDP in FY 2022. On the supply-side, the data suggests that services could grow at 9.1% though the manufacturing industry still appears to be languishing with a 1.6% rate of growth. This would drag down the overall industrial growth rates to about 4.1%, the data indicates.
Analysts expect the construction industry to show the strongest growth of 9.1% in the current fiscal year while in the case of mining it could be a paltry 2.4% growth compared to a year ago. However, both these numbers suggest that all sectors are showing positive signs of recovery, having gone past the pre-pandemic levels already.
All of this makes economists and industry believe that the mixed domestic consumption pattern would help stave off some of the pain coming from weaker exports during the year. However, NSO is also clear that these early projections are coming from data largely based up until November, and there could be a major revision as data for the 12 months get captured.
However, economists we spoke to argue that the only place where the numbers could appear skewed is on the exports front, as the last two or three months are generally considered dull for overseas shipments. Having said so, they are in agreement that India could find itself among the fastest-growing economies in the world during the period, possibly just behind Saudi Arabia.
In the past, the GDP growth rates got revised downwards in three of the past four financial years, though this time it is rather unique that the RBI estimates are actually below those presented by the NSO data.