GDP Preview: Analysts Project Q4 Growth At 5%, FY23 GDP Above 7% Fueled By Services Sector, Private Investments

According to various estimates by analysts and economists, the country is expected to exhibit substantial improvement in the latest January-March quarter (Q4 FY23), both sequentially and year-on-year

The National Statistical Office is expected to release the official growth figures for Q4 of FY23 and the full year FY23 later on Wednesday.

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The National Statistical Office (NSO) is expected to release the official growth figures for Q4 of FY23 and the full year FY23 later on Wednesday. According to various estimates by analysts and economists, the country is expected to exhibit substantial improvement in the latest January-March quarter (Q4 FY23), both sequentially and year-on-year.

This progress is primarily driven by the manufacturing and services sectors, along with a noteworthy increase in private investment, according to a report by Bussines Standard. Analysts have projected a minimum GDP growth of 5 per cent for Q4, and there is a consensus that the GDP growth for FY23 will hover around the official advance estimates of 7 per cent, the report noted. 

Notably, the GDP growth for Q3 FY23 (October-December) stood at 4.4 per cent, while it was 4 per cent in Q4 of FY22.

In a statement last week, Reserve Bank of India Governor Shaktikanta Das expressed the possibility of FY23 GDP growth exceeding 7 per cent. He noted that recent trends indicate a potential surpassing of the official estimate. Das highlighted that various economic indicators for Q4 reflect sustained momentum and maintained growth in economic activity.

“According to all the recent trends, it will not be a surprise if GDP growth for last year comes above the official estimate of 7 per cent. All the economic indicators for Q4 show that economic activity sustained momentum, and in fact in all the high-frequency indicators which we monitor, the momentum was maintained in Q4,” he had said.

According to the BS report, the Finance Ministry's Monthly Economic Review have also reported that corporates have initiated investments in new capacity, driven by the consistent growth in activity.

During Q4 FY23, the Centre for Monitoring Indian Economy documented the completion of projects worth Rs 60,000 crore and the announcement of new projects valued at Rs 10.9 trillion, the Ministry noted. 

According to a recent Reuters poll last week, a group of 56 economists predicts that the growth for Q4 of FY23 will be around 5 per cent. In an earlier poll in April, which included 45 economists, the projected GDP growth for FY23 was estimated to be 6.9 per cent. However, the majority of analysts now suggest that the FY23 growth will be at least 7 per cent, and there is even a possibility of surpassing that figure.

Soumya Kanti Ghosh, chief economic advisor at State Bank of India Group told Bussines Standard, “SBI’s model, based on 30 high-frequency indicators from key sectors, and tuned/trained to project the GDP numbers forecasts the quarterly GDP growth for the Q4FY23 at 5.5 per cent. At this rate, India’s GDP growth for FY23 is likely at 7.1 per cent. In India, domestic consumption and investment stand to benefit from stronger prospects for agricultural and allied activities, strengthening business and consumer confidence, and strong credit growth."

 

A poll of 15 analysts by Moneycontrol.com sees Q4 FY23 GDP growth at 5.1 per cent and most analysts now say FY23 growth will at least be 7 per cent, or could even top that. 

 

A CNBC-TV18 poll also sees the Q4 GDP at 5.1 per cent as against 4.4 per cent in the third quarter and 4.1 per cent a year ago.

 

However, some analysts are still cautious.

 

“Economic activity in Q4FY23 remained uneven, with domestic demand for services outpacing that for goods and surprisingly robust exports of services amidst a contraction in merchandise items,” Aditi Nayar, Chief Economist, ICRA Ltd told Bussines Standard

 

According to Nayar lower commodity prices offered relief for margins in some sectors, while trends in investment activity and government spending were mixed. 

 

On the other hand, Goldman Sachs has raised India's GDP growth forecast for the calendar year 2023 by 30 basis points to 6.3 per cent, citing a strong trend in services exports and lower merchandise imports expected to continue. It has pegged GDP growth for the January-March 2023 quarter at 4.9 per cent, 6.5 per cent for April-June, 5.9 per cent for July-September, and 8.1 per cent for October-December.