Q4 GDP at 6.1% higher than expected, say analysts

India’s economic growth rate accelerated to 6.1% in the January-March period of 2023, compared to 4.4% growth rate registered in the December quarter. Overall, the growth for the full financial year 2022-23 stood at 7.2%, albeit it slowed down from 9.5% growth in FY22.

Here’s what analysts have to say on Q4 gross domestic product (GDP) data:

According to Prithviraj Srinivas, Chief Economist, Axis Capital, the fourth quarter GDP growth surprised positively at 6.1% YoY versus its 5.4% estimate. In sequential, seasonally adjusted annualised terms, the economy picked up to 10%, helped by most segments on the supply side, he said.

“Meanwhile, investments and net exports played a key role on the demand side of GDP. This growth has come in spite of higher interest rates and weaker real income growth. Both parameters are likely to see improvement in the quarters ahead which should help sustain the robust pace of activity,” he says.

Rumki Majumdar, Economist, Deloitte India says that Q4 GDP data is pleasantly surprising but not completely unexpected. The strong rebound in manufacturing is the cherry on top since the modest recovery in the sector was a concern for policymakers.  

“Strong manufacturing and construction growth is encouraging because it is key to private investment in the coming quarters. With industry capacity utilization rates and the government’s capex spending reaching high levels, private investments will crowd in sooner than expected. High-frequency data on credit disbursement and light diesel oil consumption also suggest higher manufacturing activity in this FY,” Majumdar says.

Umesh Kumar Mehta, CIO, SAMCO MF, says, “The Q4 GDP numbers are a pleasant surprise at 6.1%, thereby depicting a strong revival in the Indian economy contrary to expectations and macro challenges.”

Mehta believes that the momentum has picked up pace and there is a broad-based recovery from manufacturing, mining to construction and farm sectors. “The surprise element was the farm and agriculture sectors whilst manufacturing growth was more or less inline. There is an overall revival in economic activity due to the investments from the Government being extremely strong but the consumption side is yet to catch up which is a downer. This capex led mode is surely keeping our economy afloat compared to other major global economies,” he said.

Going ahead, the analyst expects good upside from the markets and some revisions from the RBI in its upcoming policy meetings.

Ritika Chhabra, Quant Macro Strategist, Prabhudas Lilladher PMS, says the Q4 growth number is a big surprise. “In particular, on production side, agriculture growth at 5.5% is much better than expected, despite the unseasonal rains we saw in Jan-March period. The services growth has come on expected lines, supported by robust growth in trade, hotels and financial services.”

“On expenditure side, the major contributor to the growth is capital formation (at 8.9%) driven by investment expenditure by the government. However, a mere 2.8% growth in private consumption expenditure indicates waning private sector demand, which is a concern,” he adds.

As per the government, the real GDP at constant prices in FY23 is estimated to attain a level of ₹160.06 lakh crore, as against the first revised estimates of GDP for FY22 of ₹149.26 lakh crore. The nominal GDP, or GDP at current prices, in the year 2022-23 attained a level of ₹272.41 lakh crore versus ₹234.71 lakh crore in 2021-22, showing a growth rate of 16.1%.