New Delhi: A lot of economists think India’s GDP expanded more slowly than the monetary policy committee’s (MPC) forecast of 16.2% in the first quarter of the fiscal year 2022–23. (Q1FY23). Their predictions vary from 14.5 to 16 percent.

For calculating the gross domestic product (GDP) for the quarter, all significant official data, including the index of industrial production (IIP), have been made public.

At first glance, a double-digit GDP growth rate in Q1FY23 over the 20.1 percent growth rate in Q1FY22 may appear to be quite high. However, the severe second wave of Covid-19 had an impact throughout that quarter. As a result, when compared to the equivalent pre-Covid quarter of FY20, the economy shrunk by 8.5% in Q1FY22.

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If the economy grows by 16.2% during the June quarter of FY23, as predicted by the MPC, this translates to a 6.3% expansion over the same quarter of FY20.

Only CareEdge, formerly CareRatings, predicted Q1 GDP growth to be significantly greater at 17.8%. This would indicate that the economy is finally recovering since it would represent 7.7% growth over the equivalent time of FY20.

The economy is projected to have performed strongly in Q1, according to CareEdge’s senior economist Rajani Sinha, despite numerous challenges on both the local and international fronts. This is due in large part to pent-up demand, particularly in the services sector.

“High-frequency economic indicators such as goods and services tax (GST) collections, auto sales, freight movement, and bank credit offtake witnessed healthy growth, reflecting a pick-up in the economy,” Sinha said. However, rural consumption is still weak, she added.

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Meanwhile, Bank of Baroda’s chief economist Madan Sabnavis, who projected GDP growth of 14.5-15 per cent in Q1, said while sector-wise growth rates would be numerically high, the push from industry will be limited with the consumer segment not yet returning to normal. “Investment, too, has been at lower levels with only infra-based sectors showing signs of traction.”

Sabnavis estimates that BoB’s growth expectations represent a 5-5.4 percent increase over the same quarter of the pre-Covid timeframe. Compared to the same period previous year, the IIP increased by 12.7% in Q1.

However, compared to the comparable pre-Covid period, this implies a rise of 4.8%. When compared to Q1 of FY20, the IIP dropped 6.9% in Q1FY22.

IIP is a volume-based indicator, whereas GDP is a value-based estimate, it should be highlighted.

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Aditi Nayar, chief economist at ICRA, warned that the impact of rising commodity prices on producer volumes and margins will be detrimental to industrial growth.

She said double-digit GDP growth in Q1FY23 reflects the low base of the second wave of Covid-19 and the recovery in the contact intensive sectors. “However, the impact of the heat wave on wheat output would be seen in this quarter’s agriculture growth,” Nayar added.

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