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We Are Estimating India's Growth At 7.2% For FY23: Aditi Nayar, Icra

The real GDP and GVA expanded by double-digits in the quarter ending June 2022, benefitting from the low base related to the second wave of Covid-19 in Q1 FY2022 and an uneven revival in consumption, she said

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The year-on-year (YoY) gross domestic product (GDP) expansion of 13.5 per cent in Q1 of the financial year (FY) 2023 was boosted by growth in excess of 20 per cent in both private final consumption expenditure and gross fixed capital formation, said Aditi Nayar, Chief Economist, Icra. 

While talking about the economic growth, Nayar in an interview with BW Businessworld said that with the growth in Q1 FY2023 meeting our forecasts, Icra is maintaining India's projection of 7.2 per cent for FY2023.  

On the production side, she said that the gross value added (GVA) grew by 12.7 per cent in Q1 FY2023, primarily driven by a base-effect led 17.6 per cent increase in services and an 8.6 per cent rise in the industry. 

"The GVA growth of agriculture, forestry and fishing printed at a relatively lower 4.5 per cent in that quarter, which nevertheless seems rather optimistic, given the adverse impact of the heat wave on wheat harvest," she said. 

"While the monsoon pick-up tempered the economic activity momentum in July 2022, we are quite constructive on the underlying growth momentum improving in the remainder of the year, even though the YoY growth prints will most certainly taper off as the base normalises," Nayar stated. 

Nayar expects that the demand for contact-intensive services will improve further in the months ahead. Further, the measures undertaken by the central government for taming inflation in items such as edible oils, pulses, etc. are positive for consumption demand. 

Additionally, the recent correction in global commodity prices from the peaks in mid-June 2022, portends well for business margins, household consumption and investment demand in the remainder of this fiscal.

The capacity utilisation (CU) rose to a three-year high of 75.3 per cent in Q4 FY2022, exceeding the crucial threshold of 75 per cent that is usually adequate to trigger a widespread capacity expansion. 

"In spite of this, project announcements have been circumspect in the light of the global uncertainties and shift in domestic demand to services from goods," she said. 

Also, Icra expects CU to witness a seasonal dip to 71-72 per cent in Q1 FY2023 before rising gradually to 75 to 76 per cent by Q3 FY2023, which would then trigger a broader capacity expansion by the private sector. 

While the government's capex has risen by a sharp 63 per cent YoY during April-July 2022, the average monthly capex has trailed the average monthly number required to meet the FY2023 budget estimate by 16.5 per cent. 

Nayar also mentioned, "We expect the pace of capex to improve in the second half of the year vis-à-vis the current levels, providing a larger impetus to growth in H2 FY2023."

"In our view, the healthy reservoir levels augur well for a timely onset of rabi sowing, although concerns regarding the availability of labour in specific states as well as fertilisers would continue," she said. 

However, Nayar said that the signs of weakening external demand have emerged since late-June 2022, following the fears of a global recession, the ongoing Russia-Ukraine conflict and fresh uncertainties around the US-China tensions.


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indian economic growth India's Growth aditi nayar icra