Projected Q2 GDP to reach 6.5%

The base effect wearing off is also another contributing factor to the economic rebound

November 28, 2022

Analysts are forecasting the country’s GDP growth to be at 6.5% for the second quarter of FY23

The current economic momentum is primarily driven by a recovery in urban demand. India’s GDP grew by 13.5% during the first quarter of this year

Capacity utilization reached 75% in the first quarter of FY23

Agriculture’s growth in the second quarter of 2022 will be higher by 3%, compared to 4.5% in the first quarter

India’s economic growth is seen to have moderated in the July-September quarter of this year, due to strong pent-up demand, higher capital expenditure (Capex) by the government, and the base effect wearing off, according to media reports. 

According to the reports, analysts are forecasting the country’s GDP growth to be at 6.5% for the second quarter of FY23. They further added that it is expected to be lower than in the first quarter’s growth figures. 

The current economic momentum is primarily driven by a recovery in urban demand. India’s GDP grew by 13.5% during the first quarter of this year, driven by a sequential momentum in services & utilities and the pre-festive season stocking of goods. 

Additionally, capacity utilization reached 75% in the first quarter of FY23, according to reports. 

According to the Reserve Bank of India’s forecast, GDP growth in the second quarter of this year is expected to be pegged between 6.1-6.3%. By achieving this, the bank mentioned that India can witness a GDP growth rate of 7% for this fiscal. Media reports further added that the RBI in its monetary policy statement estimated GDP growth of 6.3% in the second quarter, 4.6% in the third quarter and fourth quarter each, with 7% growth in FY23. 

Furthermore, credit rating agency ICRA has estimated that India’s GDP for this year will be pegged between 6.3% and 6.5%. Comparatively, the economy grew at 8.4% in the second quarter of last year.

Sector-wise growth

As per the media reports, agriculture’s growth in the second quarter of 2022 will increase by 3%, compared to 4.5% in the first quarter. Manufacturing is expected to grow by 2.8% in the second quarter, compared to 4.8% in the first quarter of FY23. 

Electricity growth is expected to be grown by 5% in the second quarter of this year. 

As a result of the pent-up demand witnessing revival, the hospitality sector is expected to witness growth, leading to a parallel growth in trade, hotel transport and also the communication sector.

Additional forecasts

Bank of Baroda said that the GDP will reach 6.5% in the second quarter of FY23, driven by across-the-board moderation in numerous industries due to the base effect. It expects the economy to grow by 6.8% in FY23, compared to last year’s growth of 8.7%.

On the other hand, India Ratings and Research expects GDP growth in the second quarter to reach 7.2%, and FY23’s total GDP growth to stand at 6.9%. Experts said that this figure will be led by increased government Capex, festival demand, and economic activities recovering which gave a boost to the services sector. 

With an additional increase in private sector Capex, foreign investments, and growth in the number of new businesses, the Indian economy will witness sustained growth in higher figures.


Source: Financial Express

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