Beating the projections of all sorts, India’s GDP growth rate stood at 6.1 per cent in the fourth quarter of the financial year 2022-23 and this has pushed up the overall annual growth rate of the Indian Economy to 7.2 per cent. The Indian economy has once again retained its position as the fastest growing economy in the world and live up to its stature as observed by the IMF to be the lone bright spot at a time when the global economy has been grappling with the severe rise in the cost of living and supply chain disruptions due to the prolonged war between Russia and Ukraine.
Even when the first advance estimates were announced in January, 2023 and it was projected that the Indian economy is likely to grow at 7% in the current financial year, many analysts had simply passed it off as numbers. The reason was that it is was little higher than the independent estimates given by the IMF which had projected a growth rate of 6.8 per cent for the Indian economy and the World Bank which had estimated it to be 6.9 per cent. The Reserve Bank of India, in its December monetary policy review had projected the real GDP growth for 2022-23 at 6.8 per cent.
However, in my article published here on January 15th, 2023, I had expressed deep faith in these numbers because Indian economy had largely been resilient despite tough economic conditions both at the domestic and global levels due to several positives such as a large consumption base, huge infra push coupled with a series of structural and policy reforms by the government and a proactive monetary policy instance, to name a few. Indian economy’s achievement of a higher growth rate despite a plethora of threats and challenges posed by the domestic and global economy has once again showcased how resilient Indian economy is to bear the burnt of the external and internal shocks.
The growth rate increases both at constant and current prices
If we talk about the nominal GDP or the GDP at current prices, well, it is estimated at Rs. 272.41 lakh crore for the current financial year, which is higher than Rs. 234.71 lakh crore as per the first revised estimates for the previous year 2021-22. Real GDP or GDP at Constant (2011-12) Prices in the year 2022-23 is estimated to attain a level of ₹160.06 lakh crore, as against the First Revised Estimates of GDP for the year 2021-22 of ₹149.26 lakh crore.
Source Press Note on Provisional Estimates of Nation Income 2022-23 released by MOSPI on 31.05.2023
This is indicating a growth rate of 16.1 percent the financial year 2022-23 as against 18.4 per cent achieved last year for nominal GDP (at current prices) and a growth rate of 7.2 percent as against 9.1 per cent for the year 2021-22 in the real GDP (at constant prices). A comparative data for the estimated growth rates for the last two years is depicted in the following Chart:
Source Press Note on Provisional Estimates of Nation Income 2022-23 released by MOSPI on 31.05.2023
Although the growth rate is lower than what it was last year yet there is an impressive increase in the overall growth rate of the economy compared to what most analysts expected. Accordingly, the gross value added scored similar or better performance in most sectors even as the growth rate stood lower in some other sectors particularly in the manufacturing and construction sector.
Source Press Note on Privional Estimates of Nation Income 2022-23 released by MOSPI on 31.05.2023
Looking at the GVA estimates by economic activity, at constant prices, the picture is the same. The Gross Value added has been dragged down due to sluggish performance in the Manufacturing, Construction and Public Administrative Services sector, yet it has bettered its performance in every other sector.
Source Press Note on Provisional Estimates of Nation Income 2022-23 released by MOSPI on 31.05.2023
The fourth quarter performance however, has been a game changer manufacturing has bounced back to 4.5 percent after remaining negative for preceding two quarters at (-)1.4 percent and (-) 3.8 precent respectively. The performance in agriculture, mining , construction , financial & professional services other services have all improved considerably even as the growth was slightly lower in electricity and trade & hospitality sector.
Source Press Note on Provisional Estimates of Nation Income 2022-23 released by MOSPI on 31.05.2023
The rebound in the growth rate is the cumulative and collaborative effect of several initiatives taken at the macro and micro levels by the government which have seemingly activated a virtuous circle of growth in the Indian economy.
Creating Job for millions
The government has been taking invitations to create job in the public sector keeping its vision of creating one million jobs in the mission mode by December 2023. The appointments letter to the new recruits are being issued through the employment fair (‘’Rozgar Mela’’) . In the recently held Rozgar Mela, around 71,000 job letters were issued to the new recruits adding up their number to 3,59,000 Lakhs in a total 5 such events since October 2022.
Many FMCG companies such as Walmart and Cisco have kickstarted exporting goods from India setting ambitious medium to long run targets. There is a new possibility emerging in the field of semi-conductors eco system. The government is also approaching the global CEOs for stepping up employment in India.
According to Employee’s Provident Fund Organization (EPFO) the net payrolls data from the year onwards, more than 45 million people have received formal jobs besides there has been increase in the number of the self-employed people. The number of the Start-ups has increased to nearly one lakh compared to a few hundreds before the year 2014. These start-ups may have created more than a million jobs.
New Normal sets India on course to become a growth driver for global economy
The Agricultural growth rate has been around 5 percent in the last two quarters of the year 2022-23. During this period the construction and core services have also registered positive growth. The growth in the manufacturing sector has also picked up compared to the preceding two quarters. India’s Manufacturing Purchasing Managers’ Index had recorded strongest improvement to 56.4 in March compared with 55.3 in February. The record surge indicates faster expansions in new orders and output.
This surge in the Index has continued in April at 57.2 and in May at 57.2 which is the record breaking level since the year 2020. This improvement in factory activity has been boosted by demand resilience even as the selling price inflation hit a one year high. The output growth was at a 28-month high and the new orders have reportedly expanded for the 23rd month consecutively. This is also indicating increase in both output and employment in the manufacturing sector.
Inflation is getting back into tolerable limits
The retail inflation has come to 4.7 per cent in the month of April 2023 which is the lowest level of past 15 moths. This is indicative of growing macro economic stability in Indian economy. Besides, the financial markets have also shown resilience despite several stimuli present at the domestic and global levels which could have otherwise destabilized them.
The Indian economy is chasing the dream of becoming a developed nation by the year 2047 even as it has been already grappling with the increasingly unpredictable environment and changing geo political scenarios in the global economy and rising advent of regional imbalance and income disparity back home. The country is poised to take a quantum leap attuned to positive sentiments associated with the Amrit Kaal i.e., the period coinciding with 75 to 100 years of independence.
Persistent fall in inflation has led to the stabilization of raw material prices and the companies may now go for strategies like revenue growth by passing out the benefits of falling prices on to the consumers. This may also improve GDP numbers in the current fiscal.
Focus on increase in Exports
India’s merchandise export are projected to grow at 7.5 per cent to reach $773 billion out pacing the global average growth rate of around 5 per cent expected during the same period. Besides the export basket is getting diversified which shall reduce India’s dependence on to its top ten export destinations.
In a nutshell, Indian economy has been consistently maintaining its growth rate in the higher trajectory when most other economies of the world are facing repercussions of a gloomy economic environment. India is fast moving towards emerging as a growth driver for the world economy as it seems to have broken the vicious circles of poverty and appears to have onboarded itself on to a higher trajectory of growth navigating through virtuous cycle of growth and development.