India's Q1 GDP grows at 13.5%: Experts predict nation's economic roadmap

India remains the world's fastest-growing economy, with GDP expanding 13.5 per cent in the April-June quarter, the quickest pace in a year, but rising interest costs and the looming threat of recession in major world economies could slow the momentum in coming quarters. 

According to official figures issued on Wednesday, the gross domestic product (GDP) increased by 13.5% year over year compared to the previous year's growth of 20% and the prior three months' rise of 4.9%.

Although the growth was less than the Reserve Bank of India's (RBI) estimate of 16.2%, it was driven by consumption and showed signs of a recovery in domestic demand, especially in the services sector. Consumption is being driven by pent-up demand as consumers start spending after two years of epidemic limitations.

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The festival season beginning in one month will add to the services sector's recent robust recovery. Worryingly, the industrial sector's 4.8% growth rate is slowing down.

Concerning is the fact that imports are higher than exports. A monsoon that is uneven is also likely to have an impact on rural demand and agricultural growth. The Reserve Bank of India will be able to concentrate on reducing inflation, which has been above the target range of 6% for seven consecutive months, thanks to the GDP print.

The central bank has pledged to do more to bring inflation under control and has increased the benchmark policy rate by 140 basis points in three instalments since May.

The third-largest economy in Asia is also facing challenges from increasing energy and commodity prices, which might impact consumer demand and business investment plans.

Also badly hurt by rising food and gasoline prices are consumer expenditure, which makes up about 55% of economic activity.

China's 0.4% rise in GDP from April to June was greater than the GDP growth in the first quarter of the current fiscal. According to figures, private investment rose 20.1% from April to June compared to last year's period.

Public spending increased by 1.3%, but private consumption increased by 25.9%. A sharp base effect-driven 17.6% increase in services and an 8.6% increase in industry, along with a surprisingly upbeat 4.5% growth in agriculture, drove the GVA growth of 12.7% in Q1 FY2023, belying the negative effects of the heat wave on the rabi wheat harvest.

According to Finance Secretary TV Somanathan, who commented on the GDP figures, India's GDP is currently around 4% greater than before the pandemic. He emphasised that the current fiscal year, which ends on March 31, 2023, has a target fiscal deficit of 6.4% of GDP, which the government is on track to meet. According to him, the Indian economy is growing by more than 7% in the current fiscal year.

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Ajay Seth, the Economic Affairs Secretary, reported that gross fixed capital formation increased 34.7% from April to June, the highest level in ten years. Additionally, he predicted that GST tax receipts, which are closely correlated with economic activity, will be in the healthy range of Rs. 1.42–1.43 lakh crore in August.

ICRA Chief Economist Aditi Nayar predicted that GDP growth would undoubtedly slow from July to September when the base effect returns to normal. The growth of the crore sector in July was moderate, which reflected this. In July, growth in the eight core infrastructure sectors, which had been 9.9% in the same month last year, slowed to 4.5 per cent, the lowest level in six months.

The output of these infrastructure sectors expanded by 13.2 per cent in June, 19.3 per cent in May, 9.5 per cent in April, 4.8 per cent in March, 5.9 per cent in February and 4 per cent in January. 

The production growth of eight infrastructure sectors -- coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity -- was 11.5 per cent in April-July this fiscal against 21.4 per cent a year ago. 

"We foresee modest downside risks to the NSO's initial estimate of 12.7 per cent GVA growth in Q1 FY2023, on account of potential downward revisions in the agricultural performance from the current level of 4.5 per cent," Nayar said. 

The unemployment rate in metropolitan areas decreased from 12.6% in the same quarter last year to 7.6% in April-June, according to official employment data. The percentage of unemployed people in the labour force is known as the unemployment rate.

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The expansion in India contrasts with other significant economies exhibiting symptoms of a downturn, according to Rumki Majumdar, an economist with Deloitte India.

"This should help boost global investors' confidence and attract investment in the economy. The services sector is seeing a strong bounce back after a prolonged uncertainty for two years. The boost in the hospitality sector is evidence of the fact that people are wanting to catch up on travel plans. The next quarter is likely to be equally strong because of the festivities," Majumdar said. 

Real GDP or Gross Domestic Product (GDP) at Constant (2011-12) Prices in Q1 2022-23 is estimated to attain a level of Rs 36.85 lakh crore against Rs 32.46 lakh crore in Q1 2021-22, showing a growth of 13.5 per cent compared to 20.1 per cent a year ago, the National Statistical Office (NSO) statement said. 

The real GDP in absolute terms stood at Rs 27.03 lakh crore in the April-June quarter in 2020. It had contracted by 23.8 per cent in the first quarter of 2020-21 on account of lockdown restrictions to curb the spread of coronavirus. 

As per the data, Gross Value Added (GVA) grew by 12.7 per cent to Rs 34.41 lakh crore in April-June this year. The GVA growth in the farm sector is 4.5 per cent in the first quarter compared to 2.2 per cent a year ago. 

However, the GVA growth in the manufacturing sector decelerated sharply to 4.8 per cent during the quarter from 49 per cent in the year-ago period. 

The NSO stated that the Nominal GDP or GDP at Current Prices in Q1 2022-23 is estimated at Rs 64.95 lakh crore against Rs 51.27 lakh crore in Q1 2021-22, showing a growth of 26.7 per cent compared to 32.4 per cent a year ago.

(With inputs from PTI)