India's Q1 GDP growth of 7.8% slightly under RBI's 8% forecast | Experts evaluate
In an interview with CNBC-TV18, prominent economists Pranjul Bhandari, Chief India Economist at HSBC; Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India; and A Prasanna, Chief Economist at ICICI Securities Primary Dealership, extensively discussed the significance of the 7.8 percent GDP growth and, more importantly, provided insights into the GDP outlook for the remainder of the year.
The first quarter gross domestic product (GDP) growth for April to June, which stood at 7.8 percent, was marginally below the Reserve Bank of India's (RBI) projected growth rate of 8 percent.
Notably, the construction sector recorded a robust growth of 7.9 percent, while the financial sector experienced an impressive expansion of 12.2 percent.
Analysing the GDP from the expenditure perspective reveals some key insights. Firstly, private final consumption expenditure witnessed a growth of 5.9 percent. While there's room for improvement, it's a notable improvement from the 2.8 percent recorded in the previous quarter (Q4).
Additionally, gross fixed capital formation showed a robust increase of 7.9 percent. Although this figure might be slightly lower than Q4 and previous quarters, it still represents a commendable performance.
However, a significant concern is the overall deceleration in economic growth. For instance, the combined output of sectors encompassing trade, hotels, transport, communication, and broadcasting amounted to Rs 6.49 trillion in the April-June quarter, compared to Rs 6.6 trillion four years ago. This stagnation indicates a sluggish trajectory in this segment.
In an interview with CNBC-TV18, prominent economists Pranjul Bhandari, Chief India Economist at HSBC; Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India; and A Prasanna, Chief Economist at ICICI Securities Primary Dealership, extensively discussed the significance of the 7.8 percent GDP growth and, more importantly, provided insights into the GDP outlook for the remainder of the year.
To begin with, Bhandari remarked that the 7.8 percent figure appears somewhat inflated. The actual growth in practical terms is more in the vicinity of approximately 6 percent. Nevertheless, this 6 percent figure, considering the various challenges and obstacles on the global stage, is quite respectable for the current circumstances.
Prasanna further contributed by highlighting that GDP data doesn't provide a comprehensive or precise representation. gross value added (GVA) offers a more realistic perspective. Much of GDP consists of estimations or imputations.
“GDP data is not a very complete or accurate kind of representation. Gross value added (GVA) is more realistic. GDP, a lot of it is estimated or imputed,” he said.
Switching gears to discuss capital expenditure (capex) and consumption, Ghosh pointed out that the 8 percent data indicates a robust performance in capital expenditure, with early signs of increased private investment evident when examining bank credit.
However, when it comes to consumption, despite its strength, a degree of caution is warranted. It's important to remember that in Q1, there was also a surge in consumption related to the reintegration of Rs 2,000 notes into the system. A significant portion of these notes returned to circulation, which may have contributed to the uptick in consumption.
For the entire discussion, watch the accompanying video
First Published: Sept 1, 2023 6:13 PM IST
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