The government on Friday said it estimates economy to grow by 7 per cent in the current fiscal (FY23). Though it is higher than estimates by various agencies such as IMF and RBI, it is lower than the growth in FY22, which was 8.7 per cent.

“These are early projections for 2022-23. Improved data coverage, actual tax collections and expenditure incurred on subsidies, data revisions made by source agencies etc., would have a bearing on subsequent revisions of these estimates,” the National Statistical Office said while releasing data for first advance estimate for FY23. Further, it said estimates are likely to undergo revisions when the second advance estimate is announced on February 28.

While agriculture and services showed improved performance, industry, led by manufacturing, has disappointed. The good news is that the nominal GDP growth rate (taking inflation into consideration) has been estimated at 15.4 per cent as against 11.1 per cent projected in the Budget. This is expected to present the fiscal deficit, as a percentage of GDP, at or lower than the Budget Estimate of 6.4 per cent.

Resilient economy

A note prepared by Sunil Kumar Sinha (Principal Economist) and Paras Jasrai (Analyst) of India Ratings & Research (Ind-Ra) said despite global headwinds, the growth momentum witnessed in FY23 is indicative of the Indian economy’s resilience.

“However, the road ahead is not going to be easy so long as PFCE (private final consumption expenditure) does not recover fully and become broad based. The household sector, which accounts for 44-45 per cent of the GVA (Gross Value Added), saw its nominal wage growth decline to 5.7 per cent during FY17-FY21 from 8.2 per cent during FY12-FY16. In fact, the real wage growth became nearly flat or even turned negative in some months of FY23 due to high inflation. Since much of the growth in consumption demand is driven by the wage growth of the household sector, a recovery in their wage growth is an imperative for a sustainable economic recovery,” the note said.

According to Rajani Sinha, Chief Economist with CARE, while the government will continue its focus on capital spending, the main challenge will be a durable pick-up in private investment amid rising borrowing cost, demand uncertainty and global slowdown. Considering the headwinds arising on external front and its possible spillover on the Indian economy, we expect the GDP growth to moderate to around 6.1 per cent in FY24,” she said.