Centre expects economy to grow at 7% in current fiscal

NSO’s projection is higher than the 6.8% growth projected by RBI’s MPC in Dec

NEW DELHI: Indian economy is expected to grow at 7% in the fiscal year 2022-23, according to the first advanced estimates released by the national statistical office (NSO) on January 6. NSO’s latest projection is slightly higher than the 6.8% growth projected by the Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) in December 2022. IMF’s October 2022 World Economic Outlook also projected a 6.8% GDP growth for India in 2022-23.

NSO expects current price GDP growth, which is what serves as the base for budgetary calculations, to be 15.4%. This is significantly higher than the 11% nominal growth assumed in the 2022-23 Budget, and suggests that the government is on course to collect more revenue than what it had estimated in the budget.

To be sure, the latest GDP projections do confirm fears of the Indian economy already losing growth momentum. The GDP projection of 7% in 2022-23 assumes a growth rate of just 4.5% in the second half (October-March) of the fiscal year compared to the 9.7% in the first half. MPC’s December resolution projected a growth of 4.4% and 4.2% in the December 2022 and March 2023 quarters.

A sector-wise analysis of the latest Gross Value Added (GVA) numbers – they capture production minus taxes – shows that services have been an important driver of growth while manufacturing continues to struggle. Manufacturing growth in 2022-23 is expected to be 1.6% while the three subsectors of services -- Trade, Hotels, Transport, Communication & Services related to Broadcasting;

Financial, Real Estate & Professional Services; and Public Administration, Defence & Other Services have grown at 13.7%, 6.4% and 7.9% respectively. Agricultural growth is expected to increase from 3% in 2021-22 to 3.5%. The headline GVA growth is expected to be 6.7% compared to 8.1% in 2021-22.

An expenditure-side analysis of the numbers shows that private final consumption expenditure (PFCE) is expected to grow at 7.7%, while Gross Fixed Capital Formation (GFCF), which measures investment activity, is expected to grow at 11.5%.

“The advance estimates will have a short shelf life -- mostly based on extrapolation of indicators available until November. The exercise nonetheless is done to help the government to gauge the growth outlook and tax buoyancy for budget. NSO will release the revised estimate of annual national accounts of last three years by January-end, which could change the base for FY23 estimates. Meanwhile, the second advance estimate for FY23 and 3QF23 print due in end-February will probably entail more factual data inputs,” said Madhavi Arora, lead economist at Emkay Research.

REUTERS GDP projection of 7% in 2022-23 assumes a growth rate of just 4.5% in the second half (OctoberMarch) of the fiscal year compared to the 9.7% in the first half.