GDP (Gross Domestic Product) of Indian economy recorded growth of 6.1% during Jan-March’23 quarter (Q4’FY23) and 7.2% for FY23, full year as per the data released by NSO (National Statistical Office) today. The full year growth rate is better than various projections and gives reason to believe that India would be able to shield itself from global economic challenges going forward. The figure is also 10.1% higher than FY20 and implies growth rate of 4.9% CAGR for two years assuming FY21 as a lost year. Here is a brief analysis of GDP and its constituents.

As per the NSO release, Indian economy recorded GDP of Rs 160.1 lakh crore during FY23 against Rs 149.2 lakh crore in FY22. In current price or nominal terms, the figure stands at Rs 272.4 lakh crore or $3.3 trillion at Rs 82 per dollar. An issue being faced by the statistical department is significant variation in initial figures versus subsequent figure, a result of disruption in data flow due to pandemic. For FY22, the figure has been revised upwards by almost Rs 2 lakh crore. Had that not been the case, GDP growth would have even higher. And if the same trend of upward revision persists, even FY23 GDP figure may go up.

In comparison to GDP, GVA (Gross Value Added) stood at Rs 147.6 lakh crore against Rs 138 lakh crore last year, implying growth of 7%, marginally lower than GDP growth rate. Lower GVA growth implies government’s net tax collection (taxes minus subsidy) has grown more than GVA which is a good sign. However, for Q4’FY23, GVA growth rate was 6.5%, higher than GDP growth rate.

Sectoral Analysis – 

GDP of the economy is calculated by estimation of GVA (Gross Value Added) for eight sectors – Agriculture, Mining, Manufacturing, Electricity (& other utilities), Construction, Trade (hotels, transport etc), Financial (real estate & professional services) and Public Administration (& defence etc). To this, net government tax (tax collection minus subsidy outgo) is added to arrive at GDP.

Among all the eight sectors, ‘Trade, Hotels, Transport etc’ recorded the highest growth rate of 14% for full year on top of 13% growth in FY22. While the high growth rate may give an impression of a booming sector, it is only trying to make up for the loss, having declined by as much as 20% in FY21. It is still only 4.1% higher over FY20 level, the slowest of all sectors.

For manufacturing, Q4 was a big relief with growth of 4.5% after declining for previous two consecutive quarters. Growth for the full year is marginal at 1.4%, brought down due to the decline in previous two quarters. Construction, another important sector for employment generation, grew by 10.4% in fourth quarter and marginal lower for full year. The sector has grown by 19% over FY20, the highest across all eight sectors. The two large sectors, ‘Public administration etc’ and ‘Financial, real estate & professional services’, both have grown at about 7%, same as aggregate GVA growth rate. Public administration, which had grown at about 10% in FY22, has seen its growth rate come down with decline in government’s support to various sectors. The smaller sectors, agriculture, mining and electricity, recorded growth in the range of 4-7% during Q4 and 4-9% for the full year.

Expenditure Analysis –

GDP is also calculated from the expenditure side and is equal to amount spent by the three segments – expenditure by households called private final consumption expenditure (PFCE), expenditure by government called Government final consumption expenditure (GFCE) and expenditure on creating physical assets or investment called gross fixed capital formation (GFCF). Approximate share of the three were 58.5%, 10% and 34% in FY23.

GFCE (Government expenditure) was lacklustre, growing at just 2.3% for the quarter and only 0.1% for the full year. GFCE level over FY20 is only 5.7% in contrast with 14% and 18% for other two segments. However, with a general sense of government-driven activity all around, subdued figures for government spending doesn’t look very convincing. It could quite possibly be a result of more effective government spending. PFCE also hasn’t picked up much, growing at barely 2.8% in Q4 and 7.5% for full year.

The silver lining is growth in Investments which seems to doing some heavy lifting, growing by 9% in Q4 and 11.4% during the year. Over FY20, its growth stands at strong 18.4%. Investments may have got some support from government sponsored Production linked Incentive (PLI) scheme. Going forward, government will have to step up its spending as private consumption remains subdued because of inflation and general risk aversion and investments cannot hold on its own unless backed by private or government support.

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