As many as three economists predict correct GDP numbers

According to the initial provisional estimate by the statistics ministry, the GDP growth for the entire fiscal year 2022-23 is projected to be 7.2 percent.

As many as three economists -- Nirmal Bang's Teresa John, Axis Bank's  Saugata Bhattacharya and  Abhishek Gupta of Bloomberg Economics -- have correctly predicted the fiscal 2023 gross domestic product numbers at 7.2%. Meanwhile, many of the other analysts failed to predict quarterly GDP numbers.

On Wednesday, the government announced GDP numbers that experienced a notable increase, rising to 6.1 percent in the January-March period, marking the first growth uptick in three quarters. According to the initial provisional estimate by the statistics ministry, the GDP growth for the entire fiscal year 2022-23 is projected to be 7.2 percent. This figure is 20 basis points higher than the second advance estimate of 7 percent.

Also Read: India GDP numbers beat expectations, January-March growth at 6.1%

The quarterly growth rate of 6.1 percent surpasses expectations, exceeding the anticipated figure of 5.1 percent. Moreover, it is significantly higher than the highest estimate of 5.5 percent from a recent poll conducted by Moneycontrol. The strong quarterly performance indicates positive momentum and suggests a more robust economic outlook than previously anticipated.

Growth factors

In its GDP estimates report, Teresa John, the deputy head of research and economist at Nirmal Bang Institutional Equities, revised the GDP growth forecast for the March quarter to 5.2%, slightly higher than their previous estimate of 4.8%. Despite this upward revision, John maintained the FY23 GDP estimate at 7.2%.

Abhishek Gupta, a senior economist at Bloomberg, also anticipated a positive growth surprise for the GDP. He projected a growth rate of 5.7% for the March quarter and a 7.2% growth rate for FY23. Gupta attributed the higher growth expectations to favourable harvests, government subsidies that stimulate manufacturing, and increased service exports driven by multinational corporations shifting back-office operations to India.

Gupta further explained that several factors are poised to drive faster expansion in the current fiscal year, including increased public investment, expanded manufacturing subsidies, lower long-term interest rates, and improved purchasing power due to lower inflation. As a result, the growth forecast was revised upward to 6.5%, aligning with the view of the Reserve Bank of India (RBI).

Saugata Bhattacharya, economist from Axis Bank, explained that, "Our prediction was higher because we expected higher growth from the manufacturing, mining, and construction sector. But when the actual numbers came, agriculture numbers were also robust. With strong GDP numbers we see Indian economy being resilient amidst a challenging global environment."

Broad-based recovery

Meanwhile, the GDP numbers are expected to be well received by India's policymakers, providing a reason for cheer. RBI Governor Shaktikanta Das recently expressed confidence in the GDP growth for 2022-23, stating that he wouldn't be surprised if it surpasses the 7 percent mark. These positive GDP figures are likely to alleviate concerns about a potential slowdown in the Indian economy, which had been predicted by several economists.

The optimistic outlook for GDP growth suggests a more favorable economic trajectory and indicates potential stability and resilience in the Indian economy.

"This robust growth boosted by services, consumption, capital goods seem to suggest broad based recovery. While rural demand is yet to pick up, urban demand remains intact. This bodes well from a fiscal standpoint too, as tax buoyancy also improves.

"Additionally, we expect a positive impact on fiscal in FY 24 due to RBI dividend to government with macro tailwinds in India's favour, the stage seems set for a plateau in rates in coming months," said Lakshmi Iyer, CEO-Investment & Strategy, Kotak Investment Advisors.