Q2 GDP growth in line with RBI estimate at 6.3%
Indian economy grew at 6.3% in the quarter ending September 2022, the National Statistical Office (NSO) said in a release on November 30, putting GDP growth for the first half of the fiscal year at 9.7%. Private consumption rose 9.7% in the quarter, and investments, as reflected by gross fixed capital formation, by 10.4%, pointing to a continuing recovery in the economy, but analysts said global headwinds will temper growth over the current quarter and the next.
The latest GDP number is exactly in line with the September 2022 projection of the Monetary Policy Committee (MPC) and marginally higher than the 6.2% growth projection by economists in a Bloomberg poll. However, the larger trend in the GDP numbers is that of moderation of growth momentum which is also in keeping with the MPC’s projections of GDP growth coming down to 4.6% in both the remaining two quarters of the fiscal year. The fact that growth of eight core sector industries plummeted to 0.1% in the month of October according to data released Wednesday, supports this prognosis.
To be sure, India will continue to be the fastest growing major economy in the world in 2022-23 and 2023-24 according to most institutional and private forecasters. “In an uncertain external environment, domestic demand is expected to drive GDP growth,” Chief Economic Advsior (CEA) V Anantha Nageswaran said reacting to the GDP numbers, adding that the Indian economy is on track to achieve a 6.8-7 % GDP growth in 2022-23.
What makes the latest GDP numbers significant is that they will be the latest available input on the state of the economy for the 2023-24 Union Budget, the consultations for which have already started and which will likely be presented on February 1, 2023.
The CEA also said that he expects further easing in inflation “on the back of softening global commodity prices and expectations of a good Rabi (winter) crop” which should support corporate earnings, provided the geopolitical situation does not deteriorate drastically. Notwithstanding global headwinds, India’s growth momentum is propelled by festival sales and domestic demand that is seen in bank credit growth, auto sales data shows and other high frequency data, he added. “Stable banking sector is a major source of resilience amidst formidable global headwinds,” Nageswaran added.
Benchmark BSE Sensex settled above the 63,000level for the first time on Wednesday, extending its winning momentum to seventh day amid a largely positive trend in global markets and continuous foreign fund inflows.
The 30-share barometer rallied 417.81 points or 0.67% to settle at 63,099.65, its fresh record closing high. During the day, the benchmark jumped 621.17 points or 0.99% to 63,303.01, its lifetime intra-day peak.
The broader NSE Nifty advanced 140.30 points or 0.75% to end at 18,758.35, its record closing high.
Among the Sensex stocks, Mahindra & Mahindra, UltraTech Cement, Power Grid, Hindustan Unilever, Bharti Airtel, Asian Paints, Tata Steel and Titan were major gainers.
IndusInd Bank, State Bank of India, HCL Technologies and ITC were among the laggards.
“The domestic market continued its quest for gains, boosted by foreign institutional investor (FII) inflows. However, markets will be sensitive to the US Federal Reserve chairman’s remarks later in the day, as investors are expecting a moderation in the pace of rate hikes,” according to Vinod Nair, head of research at Geojit Financial Services.
“An in-line comment will help sustain the rally while loosening covid-19 restrictions in China is providing relief to global markets,” Nair said.
In the broader market, the BSE midcap gauge jumped 1.06% and smallcap index climbed 0.61%.
All sectoral indices ended in the green, with utilities rallying 2.52%, power jumped 2.35%, metal (1.96%), auto (1.74%), commodities (1.62%), realty (1.54%), telecommunication (1.44%) and consumer discretionary (1.25%).
“Sentiment turned extremely bullish towards the closing stages, as renewed foreign institutional buying propelled both the benchmark indices to scale fresh highs. Also, strong European markets opening further bolstered investors’ sentiment ahead of the Q2 GDP data announcement,” Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, said.
Markets in Seoul, Shanghai, and Hong Kong ended higher, while Tokyo settled lower. Exchanges in Europe were trading higher in the afternoon trade. Wall Street had ended on a mixed note on Tuesday.