Q1FY23 GDP at 13.5% falls short of street estimates

  • India Infoline News Service
  • 01 Sep , 2022
  • 9:29 AM
For the fiscal year FY22, India had reported real GDP growth of 8.7%. This was lower than the advance estimates by 20 bps but that is understandable considering that global markets have been in a constant state of flux. However, the estimates for GDP growth for FY23 have been maintained by the RBI at 7.2%. The real GDP growth for FY23 assumes significance for 2 reasons. Firstly, it will be the first year without the base effect advantage. Secondly, it would bring with it the added advantage of falling inflation, driven by RBI hawkishness.

On 31st August, the Ministry of Statistics and Program Implementation (MOSPI) announced the first quarter GDP growth. At 13.5%, the real GDP growth surely looks impressive. However, this is sharply lower than the estimates. RBI had pegged Q1FY23 GDP growth at 16.2% while the street consensus had pegged the Q1FY23 real GDP growth at closer to 15.5%. Real GDP growth at 13.5% Q1FY23 surely disappointed the markets. 

Data Source: MOSPI

A quick look at the trendline of the above chart is sufficient to indicate that the turnaround in GDP growth from the COVID lows has been sustained. What is remarkable is that the 13.5% real GDP growth in Q1FY23 has come on a robust base of 20.1% in Q1FY22. There is one more positive feature here. The real GDP is net of inflation. Once the RBI hawkishness results in more tangible reduction in consumer inflation, there would be an automatic upgrade of the real GDP performance. Of course, there is the risk that too much hawkishness may result in a slowdown in growth, but we will ignore that for now.

How did the GDP and GVA pan out in Q1FY23?

In the last few years, the gross value added (GVA) has emerged as a more perceptive and realistic picture of macro growth. GVA is currently used in addition to GDP. What do we understand by GVA? You can interpret GVA as; GDP shorn of the impact of indirect taxes and subsidies. Let us look at GDP and GVA growth for Q1FY23 in relative terms.

Let us look at how the GVA has grown compared to the corresponding previous quarters. Q1FY23 GVA stands at Rs34.42 trillion compared to Rs30.53 trillion in Q1FY22, implying yoy real GVA growth of 12.7%. Let us also look at how the GVA has grown compared to Q1FY21. The Q1FY23 GVA stands at Rs34.42 trillion compared to Rs25.84 trillion in Q1FY21, implying real GVA growth of 33.2% over a 2-year period.

Now for real GDP growth! Q1FY23 GDP stands at Rs36.85 trillion compared to Rs32.46 trillion in Q1FY22, implying yoy real GDP growth of 13.5%. Let us also look at how the GDP has grown compared to Q1FY21. The Q1FY23 GDP stands at Rs36.85 trillion compared to Rs27.04 trillion in Q1FY21, implying real GDP growth of 36.3% over a 2-year period. In short, growth has been decisive over last year and over the COVID lows.

A quick look at the drivers of Nominal GDP for Q1FY23

Nominal GDP is the GDP before adjusting for inflation and has a special significance. Nominal GDP shows the level of economic activity and creation of jobs, in the economy. Of course, the GDP used in common parlance is always real GDP, but nominal GDP has an analytical impact. For Q1FY23, the nominal GDP was Rs64.95 trillion, which is a yoy growth of 26.7%. On a pre-COVID 2-year basis, nominal GDP grew 67.7%. Here are the key drivers.

a)      Let us first look at private final consumption. It has risen from Rs28.47 trillion in Q1FY22 to Rs39.71 trillion in Q1FY23. That is positive growth of +39.5% yoy. Private consumption has bounced and its share in GDP is correspondingly up by 560 basis points.

b)      Government consumption expenditure has moved from Rs6.61 trillion in Q1FY22 to Rs7.32 trillion in Q1FY23. That is positive growth of +10.7%. Government initiated spending has seen growth, but its share in GDP has fallen yoy  by 160 bps.

c)      Gross Fixed Capital Formation has moved from Rs14.44 trillion in Q1FY22 to Rs18.97 trillion in Q1FY23. That is positive growth of +31.4%. Capital formation has not only picked up over last year but its share in GDP has also increased by 100 bps.

d)      The head of VALUABLES has moved from Rs0.32 trillion in Q1FY22 to Rs0.50 trillion in Q1FY23. That is positive growth of 56.3%. This is not great news as it shows diverting spending into idle assets like gold and jewellery; but levels are down over FY22 median.

e)      Merchandise Exports increased from Rs11.28 trillion in Q1FY22 to Rs14.63 trillion in Q1FY23. That is positive growth of +29.7% yoy. One of the key factors driving post-COVID recovery has been exports and its share in GDP is up by 50 bps yoy.

f)       Merchandise Imports has surged from Rs11.59 trillion in Q1FY22 to Rs18.07 trillion in Q1FY23. That is positive growth of +56.0%. A surge in import value of oil, coal, ores and fertilizers has resulted in the share of imports in GDP rising by 520 bps yoy.

To sum it up, there are two major news stories to absorb from the data above. Firstly, private consumption is back with a bang and that is good news. Even if volumes don’t pick up in a big way, pricing power will remain with corporates. On the downside, imports have surged sharply and that is resulting in a lot of imported inflation. That is the worry.

What were the sectoral drivers of GVA for FY22?

The GVA growth of 12.7% for Q1FY23 can be broken up into some important sectors that can give a clear direction of the winds blowing in the economy. The broad division of primary, secondary and tertiary sectors are further classified into more granular pieces.

Industry Segment Q1FY23 GVA (INR) Q1FY23 over Q1FY22 Q1FY23 over Q1FY21
Agriculture, Forestry Rs4.93 trillion 4.5% 6.8%
Mining, Quarrying Rs0.85 trillion 6.5% 25.62%
Manufacturing Rs6.05 trillion 4.8% 56.2%
Power, Gas, Water Rs0.89 trillion 14.7% 30.5%
Construction Rs2.63 trillion 16.8% 100.0%
Trade, Hotels, Transport Rs5.60 trillion 25.7% 68.8%
Financial, Realty Rs8.80 trillion 9.2% 11.7%
Public admin, Defence Rs4.66 trillion 26.3% 34.2%
Data Source: MOSPI

In the above case, the yoy GVA growth for Q1FY23 may be more reflective than the 2 year growth as the latter may be relatively magnified due to the extremely low COVID base. However, there are a few broad trends emerging. The contact intensive segments like trade hotels and transport have shown a sharp growth from the COVID lows and that can provide a key impetus to GDP. Construction is also robust, although manufacturing growth is low and likely to have strong externalities on overall GVA and GDP growth.

In a sense, the steady growth in GDP is commendable considering the global headwinds like central bank hawkishness, commodity inflation and the war situation in Ukraine are still rampant and continue to impact supply chains. Going ahead, falling inflation should now provide a leg up to real GDP growth.

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Q2 GDP Growth: A sequential recovery, but headwinds ahead: HDFC Bank

  • India Infoline News Service
  • 01 Dec , 2022
  • 4:54 PM
To recall, the first quarter numbers had been bumped up as the low base from the pandemic years had continued to distort the y-o-y figures. From the supply side, GVA (Gross Value Added) growth stood at 5.6% y-o-y (lower than HDFC Bank's expectations) widening its gap with GDP growth (70bps) in the second quarter (possibly due to higher tax collections, GDP = GVA + Net Taxes).
On a sequential basis (q-o-q), growth was in the green in the second quarter – a signal that the economy continued to recover despite global headwinds. GDP growth rose by 3.6% q-o-q in Q2 compared to a contraction of 9.6% in Q1. Secondly, all sectors moved above pre-pandemic output levels. To recall, services like trade, hotels, transport and communications hadn’t yet surpassed pre-COVID levels in the last quarter.

Agriculture sector recorded growth of 4.6% y-o-y despite the impact of uneven monsoons on kharif production. But the bigger contributor to growth was the services segment that recorded the highest sequential growth in the last three quarters (rose by 8.7% q-o-q in Q2) – clearly reflecting the impact of the re-opening effect.

The biggest contributors to GDP growth in Q2 were investment and private consumption and the component “discrepancies”. The latter is usually a residual showing the difference between the production and expenditure approach to calculating GDP (For details on this see RBI’s paper, “Statistical Discrepancies in GDP Data: Evidence from India”, 2018). Bottomline is that a high discrepancy value does increase the likelihood of revision in the Q2 (overall and internals) numbers in the subsequent releases. Net exports and government consumption expenditure were key drags in the quarter.

Economists at HDFC Bank are holding on to their FY23 annual GDP forecast of 6.8% and expect growth in Q3 and Q4 to be between 4-4.5%. For FY24, they expect GDP growth of 6.3%, with downside risks to their forecasts. There are risks stemming from the slowdown in global growth and impact of inflation and tighter financial conditions on the consumption recovery. On the policy front, this GDP print does not change HDFC Bank's view on RBI’s rate action in December. Inflation remains above the RBI’s upper tolerance band and warrants a further increase in rates. Economists at HDFC Bank continue to expect a 35bps rate hike in the next policy and then a 25bps in the February policy, which would take the policy rate to 6.5% by fiscal year end.

First Advance Estimates peg FY23 GDP growth at 7%

  • 07 Jan , 2023
  • 6:12 AM
  • Till date the government has already announced GDP data for the June 2022 and the September 2022 quarters. While the June 2022 GDP had impressed at 13.5%, the September 2022 GDP tapered to 6.3%, although it was still much higher than street estimates.

On 06th January 2023, the National Statistical Office, MOSPI, released its first advance estimates (AE) of GDP for the financial year 2022-23. It must be noted that the second advance estimate will be released on 28-Feb along with the Dec-22 quarter GDP data. However, the final full year GDP for FY23 will be released on 30th May 2023. 

How GDP panned out in the last 12 quarters

The table below captures the annualized GDP (declared quarterly) for the last 12 quarters in succession. 


Real GDP Growth (%)

Quarter ended December 2019


Quarter ended March 2020


Quarter ended June 2020


Quarter ended September 2020


Quarter ended December 2020


Quarter ended March 2021


Quarter ended June 2021


Quarter ended September 2021


Quarter ended December 2021


Quarter ended March 2022


Quarter ended June 2022


Quarter ended September 2022


Data Source: MOSPI

The first Advance Estimate (AE) of 7.0% estimated by the MOSPI for FY23, is almost at par with the estimates put out by the RBI. The data shows a lot of confidence that the Indian economy could display a sharp recovery in the third and the fourth quarters of FY23. 

Focus on GDP and GVA estimates for FY23

In recent times, the gross value added (GVA) has emerged as a very strong and veritable alternative to GDP to gauge output growth. GVA is the GDP adjusted for the impact of indirect taxes and subsidies; and hence it is considered to be a more realistic reflection of growth. Let us look at GDP and GVA growth projected for FY23 over FY22 and FY21.

How is GVA projected for FY23. GVA is estimated to grow 6.7% yoy over FY22 to Rs145.19 trillion. For FY22, the full year GVA had come in at 8.1%. The previous year growth may be tad misleading due to the base advantage. The growth in FY23 is more reliable as there is less of base effect involved. One quick takeaway from the data is that growth has overcome the COVID overhang. Of course, FY23 has been challenging due to a number of factors like Fed hawkishness, spike in inflation, fear of global slowdown, falling exports etc. Despite these headwinds, GVA growth estimate of 6.7% is certainly commendable.

How about real GDP growth for FY23? GDP is estimated to grow 7.0% yoy over FY22 to Rs157.60 trillion. Here again, it must be said that the growth number in FY23 is more reliable as there is less base effect involved. GDP growth in FY23 is coming amidst several headwinds like central bank hawkishness, RBI staying hawkish, Corporates hit by cost spikes, operating margins contracting etc. Under these circumstances, GDP growth estimate of 7.0% is largely a redemption of the India growth story.

How some of the lead indicators of GDP look like?

The key is to understand how the components of GDP look like in the total GDP base of Rs157.60 trillion in FY23 as per first AE. Unlike in the previous year, when we compared FY22 over FY20, this year we shall directly compare FY23 with FY22, since the base COVID effect is already neutralized. Here are the highlights of the GDP components.

  1. Let us first look at private final consumption. It has grown from Rs83.78 trillion in FY22 to Rs90.22 trillion in FY23 (AE). That is growth of 7.7% yoy. Clearly, private consumption is driving the GDP growth in FY23, if we go by the advance estimates.

  2. Government consumption expenditure has growth from Rs15.77 trillion in FY22 to Rs16.26 trillion in FY23. That is positive growth of 3.1%. This is not as robust as last year, which his understandable with the government reducing its role in driving growth.

  3. Gross Fixed Capital Formation has grown sharply from Rs47.84 trillion in FY22 to Rs53.36 trillion in FY23. That is positive growth of 11.5%. Capital formation is clearly driving growth, as is evident from the overflowing order books of capital goods companies.

  4. The head of VALUABLES has remained static at around Rs2.96 trillion. In a way, that is good since it indicates that people are not aggressively diverting spending into assets like gold and jewellery. That was also evident in the tepid festival demand for gold.

  5. Merchandise Exports increased from Rs31.75 trillion in FY22 to Rs35.70 trillion in FY23. That is positive growth of 12.4%. Exports as a sub-set of trade has been a very important driver of GDP in FY23 also with the spike maintained at last year’s levels.

  6. Merchandise Imports surged from Rs38.78 trillion in FY22 to Rs46.89 trillion in FY23. That is positive growth of 20.9% yoy. While oil and gold imports tapered, that is more than made up by imports of coking coal, fertilizers, ores, chemicals etc.

How do we sum up the lead indicator story. There are two positives. Firstly, private consumption is picking up and secondly the capital formation has got a big boost. Both are positive for sustainable GDP growth. Of course, the spike in imports remains a challenge, but that may not really have short term solutions.

Sectoral GVA picture and where is growth coming from?

The first advance estimates (AE) pegged the GVA growth at 6.7% for FY23 and the GDP growth at 7.0% for FY22. This is slightly better than the generally pessimistic estimates floating around in the last few months. Here is a quick look at how the GVA growth (net of taxes and subsidies) is likely to look like in the fiscal year FY23.

Industry Segment

FY23 GVA (Rs Trillion)

FY23 over FY22

FY22 over FY21

Agriculture, ForestryRs21.83 trillion3.5%6.6%
Mining, QuarryingRs3.36 trillion2.4%12.2%
ManufacturingRs25.09 trillion1.6%11.6%
Power, Gas, WaterRs3.40 trillion9.0%17.2%
ConstructionRs11.71 trillion9.1%21.7%
Trade, Hotels, TransportRs27.12 trillion13.7%26.3%
Financial, RealtyRs32.84 trillion6.4%10.9%
Public admin, DefenceRs19.84 trillion7.9%21.5%

Data Source: MOSPI

A quick comparison shows that while agriculture has been stable, mining has been trending on the lower side and it is more supply driven. The big disappointment as per the FY23 AE is the manufacturing sector, which his likely to grow at a tepid 1.6% for the year. That has been more than compensated by a sharp growth in the services sector. For instance, construction has continued growth at 9.1% while financial and realty services are pegged to grow at 6.4%. The standout sector is likely to be the trade and hotels segment, which had been the worst by the pandemic, being a highly contact intensive segment. That is the segment that is seeing a lot of revenge buying and that shows in the numbers.

In a global scenario racked by several headwinds, Indian economy is looking to put up a good show. That is the real takeaway from the First AE for FY23 GDP.


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  • 01 December, 2022 |
  • 1:21 PM

GDP growth in Q2 FY23 stood at 6.3% y-o-y (in line with HDFC Bank's forecast) compared to 13.5% in Q1.

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