Economists expect India’s GDP growth of 12.5-15% in Q1

BENGALERU : India’s economy is expected to have seen double-digit growth in the first quarter of the current fiscal year, supported by a strong recovery in consumption and a recovery in the service sector, and a weak base, economists say.

With forecasts of between 12.5% ​​and 15%, economists said private investment had yet to fully recover and rising interest rates driven by tighter monetary policy could pose a challenge. for additional investment in manufacturing, while high inflation would keep corporate margins under pressure.

Most analysts estimated that economic growth would be lower than the RBI forecast of 16.2% for the June quarter and 7.2% for the financial year. The official national accounts data will be released on August 31. “Investment growth is supported by strong government investment spending and private sector investment spending growth has not fully recovered.

The first quarter of 2022-23 will be supported by the base effect,” said Devendra Pant, chief economist at India Ratings and Research. Pant estimated that gross domestic product (GDP) should grow 13.3% in the first quarter of the fiscal year. Growth will be driven by private consumption and investment, amplified by the base effect.

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Pant said private final consumption expenditure, indicating demand, and gross fixed capital formation, indicating investment, are expected to rise 15.4% and 14.3%, respectively.

High global commodity prices and the rupee at a historic low have hit corporate margins, the companies’ June quarter results showed. Retail price inflation hovered around 7% for the three months to June, well above the RBI’s upper 6% tolerance band. Inflation based on the wholesale price index is in double digits, hovering over 15%.

“We expect Q1 GDP growth of 12.5-13%, driven by a weak base and robust demand for services. Pressure on margins created by high commodity prices, reduced demand for goods inflation amid high inflation and the negative impact of the heatwave on wheat production led us to expect growth below the MPC forecast of 16.2%,” said Aditi Nayar, Chief Economist . , ICRA.

Nayar said signals from private investment activity remain mixed given geopolitical uncertainties and high commodity prices, despite high capacity utilization in the fourth quarter of FY22. India’s economy grew 4.1% in the fourth quarter of FY22 and 8.7% in 2021-22.

Mr. Govinda Rao, Chief Economic Advisor, Brickwork Ratings, who estimates the economy is expected to grow by 7% in 2022-23, said that while capacity utilization has shown a steady increase, “accelerating manufacturing growth will have to come from additional investment. “With rising interest rates, that will likely be a challenge,” Rao said.

On Friday, the RBI-led monetary policy committee raised the policy rate by another 50 basis points, for the third consecutive time, taking the repo rate to pre-pandemic levels of 5.4%.

Madan Sabnavis, chief economist, BoB, said investment was at “lower levels” with only infra-based sectors showing signs of traction. the segment is not yet back to normal.” Sabnavis expects GDP growth in the June quarter to be 14.5-15%. “This growth comes on strong base growth, but would translate to 5-5.4% in the first quarter of FY20,” Sabnavis said.

HDFC Bank estimates GDP growth in the first fiscal quarter at 14.3%, as economic activity picks up, despite global headwinds. “A generalized improvement in high-frequency indicators was seen in the consumer, industrial, investment and contact-intensive services sectors. That said, some slowdown was seen in exports. In addition, the base effect is also in play, which is keeping the year-on-year number high in the first quarter,” said Swati Arora, Senior Economist, HDFC Bank.

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