India's January-March GDP growth seen rising to 5.1%: economists' poll

Further, India's net services exports stood at $41 billion in January-March 2023 – up 6.1 percent from the previous quarter and a massive 45.1 percent higher than in January-March 2022.

According to Aditi Nayar, chief economist at ICRA, growth in gross value added of the services sector may have edged up to 6.4 percent from 6.2 percent in October-December.

Meanwhile, industry growth is expected to have been more subdued, but likely picked up from the last quarter of 2022. Rahul Bajoria, Head of EM Asia (ex-China) Economics Research at Barclays, expects the manufacturing sector to have expanded by 1.5 percent in January-March after contracting by 1.1 percent in October-December and 3.6 percent in July-September.

The agriculture sector is seen growing by 3-3.5 percent.

On the expenditure side, private final consumption expenditure is seen recovering after its collapse in October-December when it posted an increase of a mere 2.1 percent in the key festival period, down from 8.8 percent growth in July-September.

"Urban sector continues to lead the recovery with FMCG (Fast Moving Consumer Goods) urban sales volume rising 5.3 percent in Q4FY23," Gaura Sen Gupta, India economist at IDFC First Bank, said.

However, Sen Gupta noted that other indicators of urban consumption, such as passenger vehicle sales, production of consumer goods, air travel, and petrol consumption painted a mixed picture.

According to QuantEco Research, India's urban consumption ended 2022-23 at a three-and-a-half-year high, with rural consumption also showing signs of consolidating.

Policy impact

A growth rate of 5.1 percent in January-March would mean the statistics ministry's first provisional estimate of the full year's GDP would match its second advance estimate of 7 percent. However, the authorities are increasingly seeing an upside to the 2022-23 growth number.

Speaking at the Confederation of Indian Industry's Annual Session on May 24, Reserve Bank of India (RBI) Governor Shaktikanta Das said he "would not be surprised" if GDP growth was more than 7 percent in 2022-23.

The central bank chief is not the only one who sees things turning out better than previously forecast.

"SBI's ANN (Artificial Neural Network) model, based on 30 high-frequency indicators from key sectors, and tuned to project the GDP numbers, forecasts the quarterly GDP growth for the Q4FY23 at 5.5 percent. At this rate, India's GDP growth for 2022-23 is likely at 7.1 percent," said Soumya Kanti Ghosh, State Bank of India's group chief economic adviser.

The RBI's Monetary Policy Committee (MPC) left the repo rate unchanged in April, citing the need to see the impact of its 250 basis points worth of rate hikes before taking further action, if needed, to cool down inflation.

One basis point is one-hundredth of a percentage point.

However, inflation concerns have eased rapidly in the last two months, with data released after the last monetary policy decision showing Consumer Price Index (CPI) inflation slip to 5.66 percent in March and then to an 18-month low of 4.66 percent in April.

Economists see it falling even further and close to the RBI's medium-term target of 4 percent in May, data for which will be released on June 12 – four days after the MPC announces its next interest rate decision.

"Overall, we think a steady growth trajectory, despite the external headwinds, will likely be of comfort to the RBI in holding rates, even as inflation is expected to fall," noted Bajoria of Barclays.

"The RBI is likely to be on hold for the rest of the fiscal year, in our view, with only a major upside inflation shock likely to stir the bank back into rate action," he added.