With the nation set to unveil its official GDP growth rate for the April-June period of this year today evening, there is a consensus that the numbers are going to be good. Some economists are even predicting a growth rate higher than 15 per cent for this quarter.
The usually conservative RBI itself has stuck its neck out with a 16.2 per cent growth rate prediction, and the whole year at 7.2 per cent.
But, is it all good news?
Historical perspective does temper the euphoria a wee bit. Whether the glass is half-full or half-empty depends on how you look at it. This is because quarter one GDP growth has been eventful for the past three years—in 2020, it was a dud with the Covid-induced national lockdown, declining at 24.4 per cent in the three-month period. The pick-up of 20.1 per cent for the same period the next year, this time devastated by the second wave, was not even cold comfort, due to the previous year's rock-bottom figures. Hence, on the face of it, the good figures this time only cloaks the bitter shape the economy has been in for the past couple of years.
At least, the positives this time are a slow picking up of indices and economic growth, and a tempering of oil prices and the other challenges posed by Russia's Ukraine invasion which rattled the January-March quarter, when the world was just about set to recover the impact of the pandemic.
“We expect GDP to grow by 14 per cent-14.5 per cent y-o-y in Q1 FY23 backed by low base and strong domestic demand," said Ritika Chhabra, economist at Prabhudas Lilladher, an investment advisory firm. "A broad-based pickup was observed across consumption, services industry and investment."
The strong recovery in consumption (basically private citizens spending money) and that of the services sectors (which is India's strength and had suffered in parts post the pandemic) has been India's bright spot.
"The services sector-led sectoral growth, followed by the industry, has been a driving force, despite subdued growth in agriculture, forestry, and fishing given the fact that the heat wave across the country had adversely impacted the crops," pointed out Dr. Rajendra K. Sinha, professor & chairperson, Centre of Excellence in Banking, JAGSoM.
But, there are uncertainties abound. The biggest is that of a looming global recession and how it will impact India. While the general consensus right now seems to be that, while the west may be buffeted, India will not go down into negative growth, the worry is how its tailwinds will be felt.
"Contrary to the global leading indicators pointing to weakening momentum and mild recessions in the US and Europe, India’s outlook in GDP growth in Q1 FY23 looks quite impressive," said Sinha.
Exports, where India made hay during the global supply chain mishmash last financial year, could be one area that could be affected. Chhabra says as much. "Net exports will be a drag due to high average crude price during Q1.”
Also, while big business profits shot through the roof post-Covid, a lack of further and substantial capital investment has been worrying the government. The rise in the cost of loans—repo rates are almost certain to be hiked further in the coming months—will only further reduce the appetite for investment and expansion by India Inc.
Whether Putin will throw a nasty surprise come winter will also play heavily in the back of the mind of economists, as India and the world heads into an uncertain autumn.
