India’s GDP growth slows to 4.4% in Q3 on weakness in manufacturing

India’s economic growth slumped to 4.4 per cent in October-December 2022 period, sharply down from 6.3 per cent recorded in the previous quarter, as rising borrowing costs amid a gloomy global outlook dampened manufacturing activities and consumption demands.

Gross domestic product (GDP) at constant (2011-12) prices in the third quarter of 2022-23 is estimated at Rs 40.19 lakh crore, as against Rs 38.51 lakh crore recorded in the corresponding period of the previous year, showing a growth of 4.4 per cent, as per data released by the National Statistical Office (NSO) on Tuesday.

There has been a sharp decline in GDP growth on a quarter-on-quarter basis. India’s GDP expanded by 13.5 per cent in the first quarter of 2022-23. In the second quarter, it slumped to less than half and has now weakened further in the third quarter.

Also read | Growth projection of 7% for current fiscal very realistic: CEA Anantha Nageswaran

Low private consumption coupled with lower government spending and a contraction in manufacturing are key reasons for the slowdown in economic growth.

Private consumption spending was the biggest drag on the GDP numbers, according to Rumki Majumdar, Economist, Deloitte India. “Sustained growth in consumer spending is a concern which has led to hesitation amongst businesses to increase private investments,” she added.

The manufacturing sector contracted by 1.1 per cent in the third quarter of 2022-23 as against a growth of 1.3 per cent in the same period last year.

GDP at current prices, or nominal GDP, is estimated at Rs 69.38 lakh crore for the third quarter of the current financial year as against Rs 62.39 lakh crore recorded in the corresponding period of the previous year, showing a growth of 11.2 per cent.

For the full fiscal 2022-23, the NSO has pegged the GDP growth at 7 per cent. This is in line with the first Advance Estimates released in January. The GDP grew by 9.1 per cent in 2021-22.

Real GDP is estimated to increase to Rs 159.71 lakh crore in 2022-23 as against the first revised estimate of GDP for the year 2021-22 of Rs 149.26 lakh crore.

“The sluggish pace of the GDP growth suggests that there is a shortage of investment, resulting in less disposable income for people & unemployment,” the main opposition Congress Party said in a tweet attacking the Prime Minister Narendra Modi government for economic mismanagement.

“The loss in growth momentum is due to fading away of favorable base effect, slowdown in pent up demand due to high inflation, interest rates and contraction in manufacturing sectors,” Ritika Chhabra, Quant Macro Strategist, Prabhudas Lilladher PMS, told DH.

According to Chief Economic Advisor V Anantha Nageswaran, the full financial year GDP growth rate of 7 per cent can be achieved with an expansion of just 4-4.1 per cent in January-March quarter.

“The 7 per cent real GDP growth estimate for 2022-23 is very realistic,” Nageswaran told reporters.

As per the government estimates the GDP growth is estimated to slow to 6.5 per cent in the financial year beginning April 2023.

Dipti Deshpande, Principal Economist, CRISIL Ltd, said the global demand slowdown, particularly for goods, and waning momentum in domestic consumption demand would continue to be a drag on growth in the next fiscal.

“A sharper-than-expected global growth slowdown and forecasts of an El Nino that can disturb Indian monsoons are the other risks to watch out for,” Deshpande said.