Delhi, India: Manufacturing activity was seen to be sluggish in the December quarter, which resulted in a 4.4% slowdown in India's economic activity. However, the government remained optimistic about meeting the 7% growth estimate for the current fiscal year.
The economy expanded by 5.2% in the December quarter of 2021 and 6.3% in the second quarter of the current fiscal year.
One of the reasons for the moderation in the third quarter of the current fiscal year was that the National Statistical Office revised upward the growth for 2021-2022 to 9.1%, up from 8.7% previously.
Apart from the base effect, sectoral data based on gross value added estimated that manufacturing contracted by 1.1% in the third quarter, which was slightly less than the 3.6% contraction predicted for July-September.
“The primary disappointment is manufacturing's negative growth, which can be attributed to this sector's weak profit and loss accounts. According to Madan Sabnavis, chief economist at Bank of Baroda, "high input costs did result in a decline in profits in the second quarter."
In addition, housing, hospitality, and financial services experienced faster growth than a year ago thanks to a strong kharif harvest.
Even though overall capital formation held up, it appeared that a weakening of consumption demand had an impact.
Economists believe that the January-March quarter will be difficult for the economy to grow at 5.1% in order to meet the 7% growth goal for the current fiscal year. This is because demand appeared to be weaker than it had been previously.
We have observed that GDP growth has been revised upward for the first two quarters of the previous fiscal year, while it has been revised downward for the third quarter. It won't be easy to achieve 7% growth in FY23 unless GDP is revised downward in the fourth quarter of FY22, similar to growth in the third quarter of FY22. According to Devendra Pant, chief economist and head (public finance) at India Ratings & Research, "We still maintain our 6.9% GDP growth forecast for FY23."
The World Bank and the Reserve Bank of India both anticipate a 6.8% expansion for the upcoming fiscal year.
Chief economic adviser V Anantha Nageswaran told reporters, citing high-frequency indicators like auto sales, housing launches, and air traffic, that "the trends that we have in terms of high-frequency data for 2022-23 for the fourth quarter do indicate that achieving that growth rate in the fourth quarter is well within the realm of possibility and, therefore, the 7% real GDP growth estimate for 2022-23 is very realistic." Additionally, due to the fact that the quarterly figures were not seasonally adjusted, he stated, it was difficult to overvalue them.