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Services Sector To Drive YoY GDP Growth At 4.9% In Q4 FY2023: Icra

The rating agency estimates services gross value added (GVA) year-on-year (YoY) growth to have risen mildly to 6.4 per cent in Q4 FY2023 from 6.2 per cent in Q3 FY2023.

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The rating agency Icra has projected the year-on-year (YoY) growth of the gross domestic product (GDP) in Q4 FY2023 at 4.9 per cent, a modest step-up from the 4.4 per cent recorded in Q3 FY2023. 

The gross value added (GVA) growth is seen at a higher 5.1 per cent in Q4 FY2023 (+4.6 per cent in Q3 FY2023), driven by the services sector (+6.4 per cent) amidst a relatively lower growth witnessed in the industry (+3.6 per cent) and agriculture (+3.5 per cent), Icra said.

The rating agency estimated services GVA YoY growth to have risen mildly to 6.4 per cent in Q4 FY2023 from 6.2 per cent in Q3 FY2023. 

The YoY performance of nine of the 14 high-frequency indicators of the services sector improved in Q4 FY2023 relative to Q3 FY2023, partly reflecting the robust demand for the contact-intensive segment and the low base of Covid 3.0 for some sectors such as aviation, it added.

This set includes domestic airlines' passenger traffic, ATF consumption, rail freight, GST e-way bills, port cargo traffic, petrol consumption, and states’ revenue expenditure. 

However, the YoY growth performance worsened in Q4 FY2023 relative to Q3 FY2023 for CV sales, CP volumes, diesel consumption and services exports as well as the government's non-interest revenue spending.

Aditi Nayar, Chief Economist, Icra said, “Economic activity in Q4 FY2023 remained uneven, with domestic demand for services outpacing that for goods and surprisingly robust exports of services amidst a contraction in merchandise items."

Nayar added that lower commodity prices offered relief for margins in some sectors, while trends in investment activity and Government spending were mixed. However, unseasonal rains are expected to have affected the rabi output of some crops, weighing upon the growth of the agri GVA.

Also, Icra estimated the industrial GVA YoY growth to have improved to 3.6 per cent in Q4 FY2023 from 2.4 per cent in Q3 FY2023, aided by an improvement in manufacturing, mining and quarrying. 

The manufacturing GVA is likely to have reverted to a YoY growth of 1.0 to 2.0 per cent in Q4 FY2023 after contracting for the previous two quarters, benefitting from higher volumes as well as lower margin pressure owing to the downtrend in prices of many commodities. 

Notwithstanding a sequential moderation, electricity, gas, water supply and other utilities and construction are expected to display a healthy seven per cent expansion each in Q4 FY2023.

The value of India’s merchandise exports continued to show a YoY decline in Q4 FY2023 (to -2.0 per cent from -2.1 per cent in Q3 FY2023), partly led by commodity prices. In contrast, the cargo handled at major ports reported an uptick in the YoY growth to 8.6 per cent from 5.4 per cent, respectively.