India’s GDP growth slides to 4.4%

India’s Gross Domestic Product (GDP) growth slowed to a three-quarter low of 4.4% in the October-December period of 2022-23 due to a contraction in manufacturing, weaker private consumption demand and government expenditure, according to data released by the National Statistical Office (NSO). This marks a decline from the 6.3% growth in the previous quarter and 13.2% in the April-June quarter, reflecting the impact of subdued consumption demand and exports amid rising input costs and interest rates, as the Reserve Bank of India remained focused on “withdrawal of accommodation.” Private consumption expenditure slowed sharply to 2.1% in October-December, despite robust high-frequency data.

The NSO has retained its growth estimate for the full financial year 2022-23 at 7% in the second advance estimates. The revised data for previous financial years showed an upward revision in the growth rate for the financial year 2021-22 to 9.1% from 8.7%, with GDP for 2020-21 now estimated at -5.8% instead of -6.6%. The fourth quarter GDP estimate at 5.1% is higher than the projection of 4.2% for Q4 given by the Reserve Bank of India (RBI) in its December policy review, with the FY23 growth estimate at 6.8%.

According to Chief Economic Adviser V Anantha Nageswaran, manufacturing has slowed down due to rising input costs, but there are enough high-frequency indicators showing robust manufacturing activity. He cautioned that quarter-on-quarter changes are less consequential and should be seen with caution, and that financial conditions globally are tightening. He added that 2023-24 may not see a big-ticket shock as in early 2022-23 but that underlying factors are still simmering and need to be watched.

The services sector, the largest component of GDP, posted a growth of 6.2% during the quarter. Agriculture is expected to grow at 3.7% in October-December, while the mining sector is seen growing 3.7% in Q3 as against a 0.4% contraction in the previous quarter. Construction recorded growth of 8.4% in Q3 as against 0.2% in the year-ago period, while trade, hotels, transport, and communication grew at 9.7% in Q3 as against 9.2% in the year-ago period. Net exports were broadly flat as weakening import demand and falling prices helped cushion the impact of falling exports.