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Q3 GDP growth

 Q3 FY23 GDP growth estimates released on 28th Feb 2023 mentions 4.4% growth as against 5.4% GDP growth estimated during Q3 of FY 22.With estimate of about 4 to 4.5% growth in Q4, the full year FY 23 GDP growth will be around RBI's GDP growth estimate of 6.8%.The nominal GDP growth for the full year FY23 will be around 15.9%

Q2 FY 22 GDP growth is now estimated at 6.3%.

The most important datapoint in these estimates is the revision of GDP growth of Pandemic years.

The cumulative average real GDP growth during FY19-20 to FY 22-23 is now estimated better at 3.2% as against the potential real GDP growth of 7% of Indian economy.

Since the GDP estimates of the previous years have been revised upwards, the base effect has impacted the current year GDP growth estimates.

The most worrying aspect of Q3 of FY 23 is the contraction of manufacturing output at -1.1%.

Private consumption which contributes about 60% of Indian GDP has also languished at 2.1% in Q3 FY23.

Again Statistics reg. IIP and Consumption Spending Survey are not reliable and they are constantly under revision upwards now.MOSPI has an important task on hand for strengthening data collection for estimating IIP and Consumer Spending and making them robust.

With unabated inflation estimated at around 6% for the FY 23 ,which is the upper tolerance level of RBI, the monetary policy will have to continue with elevated borrowing costs. Such high borrowing costs dampen Private Consumption further feeding into a vicious cycle of lower GDP growth.

Government will have to be mindful of its high fiscal deficit which is also fuelling inflation to some extent.But Government is banking on Capex expenditure to crowd in Private Investment which will counter balance the inflation through higher production efficiencies.Govt should also look at fiscal incentives apart from PLI, to bring in Private Capex through Investment allowance and accelerated Depreciation schemes for the short term covering the next couple of years.

With dark clouds of high interest rates and liquidity tightening looming all over the globe ,GOI has extremely difficult task cut out for itself  inorder to maintain high GDP growth of 6%+ in FY 24.


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