On Tuesday, the National Statistical Office released the second advance estimates of national income for the ongoing financial year. These latest estimates have pegged the Indian economy to grow at 7 per cent in 2022-23, in line with the statistical office’s earlier figures released in January. Alongside, the NSO has also released its quarterly estimates, as per which the economy grew at 4.4 per cent in the third quarter of this year (October-December). Based on these numbers, growth for the fourth quarter (January-March) of this financial year is expected to be around 5.1 per cent. Taken together, these estimates suggest that as the base effect fades, the Indian economy is likely to grow at 4.7 per cent in the second half of this year, down from 9.5 per cent in the first half.
Disaggregated data paints a more mixed picture. The agricultural sector is expected to continue to grow at a healthy pace, at 3.7 per cent in the third quarter, with growth for the full year projected at 3.3 per cent. But this projection assumes a bumper rabi crop and no damage from rising temperatures. The effects of the latter will only be known at the time of harvesting. On the other hand, the performance of the manufacturing sector has been rather dismal. For the full year, the sector is expected to barely register a rise. In fact, in both the second and third quarters of the year, value added by the sector has actually contracted. Some analysts have attributed this to higher input costs putting firm margins under pressure. The services sector has fared better as demand continues to normalise. Both the trade, hotels, transport and communication and the financial, real estate and professional services sectors have continued to register healthy growth rates. Investment activity also appears to have held up in the third quarter. But the consumption side of the data paints a worrying picture, with both private and government consumption being subdued. Government consumption in the third quarter was actually lower than in the same period last year, while growth in private consumption has slowed down sharply. This is at odds with most analysts’ expectations of household demand perking up during the festive season.
The NSO’s first advance estimates released in January were based on data on economic indicators only for the first seven to eight months of the year. The latest estimates have been able to incorporate more recent data into the assessment process. But while the numbers have been affected by revisions to previous data, the estimates are broadly in line with the government’s and Reserve Bank of India’s expectations. For the upcoming financial year, the RBI has projected economic growth to slow down to 6.4 per cent. But, considering the extent of tightening of monetary policy, both globally and domestically, there are downside risks to this forecast.
