Economic Highlights
New Delhi, 5 June 2023
India’s ‘Khush Hua’ Moment,
GDP up, core in A tizzy
By Shivaji Sarkar
Sudden boost to India’s GDP in the fourth quarter of
the financial year made it momentously different at 6.1 per cent or to 43.6
lakh crore, outpacing projections. It also pushed up the 2022-23 yearly growth
to 7.2 per cent or Rs 160.06 lakh crore making it a standout performance, adding
glitter to Prime Minister Narendra Modi’s nine years of celebration to a real
“khush hua” moment.
The Reserve Bank of India had earlier projected the
growth at 6.8 per cent. It is a level higher than its and the private
projections. Agriculture was a surprise in the January-March rabi months
growing 5.5 per cent, and construction surged to 10.4 per cent or Rs 3.9 lakh
crore. India shines at a time when most major economies are struggling. India
defies global factors, particularly in Europe and the US that are bogged down
by the Ukraine war and difficult finances.
It is not true that India is not hit by the US
sanctions but that is another story. The important factor for India is trying
to make a mark. On the production side, finance, real estate and professional
services in the last quarter grew by 7.1 per cent to Rs 7.6 lakh crore. It is a
wonder. Has the fourth quarter done so significant a difference that one tends
to believe the last few years of low growth phase is passe’ now! The figures
look good also for the reason that two years back growth reached a nadir in
terms of minus figures. Indians can make the difference and possibly the dream
of being an engine of world growth once again looks not distant.
However, an expenditure side analysis shows that two
key drivers of growth, consumption and investment seem to be in different
directions. The private final consumption expenditure (PFCE) growth slowed down
significantly over the course of the year. In the fourth quarter it grew by 2.8
per cent to Rs 23.9 lakh crore. It’s the second successive time it has grown
less than 3 per cent. There is a distribution challenge. It has a link with the
fall in quality of jobs. The women are sufferers as figures show growth in the
number of unpaid helpers.
Another aspect adds to the concern. Overall key infra
sector growth slows to a six-month low of 3.5 per cent in April. It may not all
be so bright as it appears. It is due to a decline in the output of crude oil,
natural gas, refinery products, coal and electricity. The core sector grew by
9.5 per cent in April 2022 while in March 2023 it fell to 3.6 per cent. It is
the lowest at 0.7 per cent since October 2022 when the sectors expanded by 9.7
per cent. Even coal production declined to 9 per cent. Fertiliser production
rises by 23.5 per cent, steel by 12.1 per cent and cement by 11.6 per cent. The fall in coal and electricity production
speak volumes about industrial activity.
The gross fixed capital growth (GFCF) expenditure
continues to show robust trend. Part of it is on account of government push
towards capex as capital expenditure increased by 24 per cent between
2021-2023. But it is not reflecting in private consumption. Capex often gets
into demolitions too negating the impact to some extent. The RBI Consumer
Confidence Surveys continue to show a negative trend. This is a key indicator
of the overall well-being of the people.
The private consumption is showing an impact on
manufacturing. Its gross value addition saw a contraction in three quarters. Overall
rise over the year is1.3 per cent. Even the March 2022 figures grew by 0.6 per cent.
The present growth has little to rave about. The manufacturing sector not doing
well may have an effect in the future results. It is not showing the momentum
seen in the Purchasing Manager’s Index (PMI).
This holds the threat of undermining one of the most
encouraging aspects of the GDP data, the surge of investments. Capital
formation grew by 8.9 per cent in the last quarter to Rs 15.3 lakh crore and
was 35.3 per cent of the GDP, the highest since the pandemic. But private
investment within the country and outside had not been robust possible perhaps because
low consumption factor.
Despite facing
challenges from an uninspiring global outlook, India’s growth momentum is
likely to be sustained in 2023-24 amid easing inflationary pressures, the RBI
said in its annual report for 2022-23. For 2023-24, real GDP growth is
projected at 6.5 per cent with risks evenly balanced. The economy is expected
to expand at 7 per cent in 2023.
Chief Economic Advisor V Anantha Nageswaram
expressed happiness at the trend. He says that the services sector has
maintained its growth marks. He says much of the elasticity is coming from
construction activities. This is the catch as well. It indicates that many
other sectors may not be doing as well as they are expected.
The government has been able to meet its fiscal
deficit at 6.4 per cent, much higher than RBI tolerance limit, though it is in
line with the revised budgetary estimates of 2023-24. The inflation rate fell to 4.7 per cent in
April. It says the deficit in absolute
terms is Rs 17.3 lakh crore against Rs 17.5 lakh crore in the previous year.
There is one catch. This figure is above a very high inflationary trend. It
means that overall performance of the economy in real terms might be less than
what is being claimed. If it moves as expected, fiscal deficit target could
come down to 5.9 per cent.
Morgan Stanley says that India has transformed in a
decade and gained positions in the world order. However, it says that there is
scepticism with overseas investors, “who say India has not delivered its
potential despite it being the second fastest growing economy”. The report highlights
ten big changes. These include supply-side policy reforms, formalisation of the
economy, real estate regulation and development law, digitalising social
transfers, insolvency and bankruptcy code, flexible inflation targeting, focus
on FDI, government support for corporate profits and MNC sentiments at an all-time
high.
In the light of this, industry has pinned high
hopes on the RBI. It remains to be seen how RBI acts at the Monetary Policy
Committee meeting on June 6. It is a tussle. Industry wants low rates and
depositors an increase. So would the RBI be a hawk or a dove? Nation keenly
awaits the moves.---INFA
(Copyright, India News &
Feature Alliance)
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