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Beating expectations India grows at 7.2% in 2022-23, records higher growth rate than China for 2 consecutive years

India's growth rate beats expectations

India’s economy grew at 7.2 per cent in 2022-23 driven by an expansion in the services sector and investments. Beating expectations, the country registered a GDP growth rate of 6.1 per cent in the January to March quarter of the previous financial year, as per official data.

This is higher than the third quarter—October to December growth of 4.5 per cent.

After India clocked a growth rate of 13.1 per cent in the April-June quarter, it slowed to 6.2 per cent in the second quarter. In April, this year, the International Monetary Fund lowered India’s growth projection to 5.9 per cent.

“India’s macroeconomic indicators continue to be fairly strong. The country’s economic growth as we see in the previous quarters has been significantly higher than not only the world’s growth rate but almost all other economies,” Sanjeev Sanyal, Member, Member of the Economic Advisory Council to the Prime Minister (EAC-PM) told India Narrative.

The Reserve Bank of India (RBI) in its annual report released yesterday said that India is likely to sustain its growth momentum in 2023-24 with easing inflationary pressures owing to softer commodity prices and sound macroeconomic policies among other things.

RBI Governor Shaktikanta Das last week said that India’s growth momentum picked up in the fourth quarter.

“In fact, all the high-frequency indicators, around 70 of them, which we monitored in the Reserve Bank of India, almost in all of these high-frequency indicators, the momentum was maintained in the fourth quarter. So therefore, we should not be surprised if the growth is slightly more than 7 per cent,” he said.

Importantly, the inflation rate too for the rest of this year is projected to remain below the RBI’s 6 per cent threshold. Despite lurking threats of an emerging El Nino situation, the India Meteorological Department’s (IMD) has predicted a normal monsoon this year. This would provide adequate room to the RBI to focus on growth. Rural economy is critical for India’s economic recovery as 47 per cent of the population is dependent on agriculture for livelihood.

India and China

India’s growth rate has surpassed that of China’s for two consecutive years.

In the January-March period, the Chinese economy expanded 4.5 per cent compared to 2.9 per cent growth in the October-December quarter of 2022. In 2022, China’s growth rate stood at 3 per cent as against official projection of 5.5 per cent.

In 2021-22, India clocked a growth rate of 9.1 per cent while China grew at 8.4 per cent in 2021.

Meanwhile, for the current year, China has set a modest GDP target of around 5 per cent for 2023.

A State Bank of India report said that the Union Budget’s emphasis on capital expenditure is expected to crowd-in private investment, strengthen job creation and demand, and raise growth potential.

India Inc will also be relieved with the economic turnaround. In the January-March period, around 1700 listed entities reported top line growth of 12 per cent. Their net profit grew by around 19 per cent as compared to the same period previous year, the report added.

However, with rising global challenges India needs to be watchful. The slowdown and uncertainty in the advanced economies would have an impact on India’s economy.

“There is clearly a lot of uncertainty in the world, whether it is because of the war or stress in the financial systems in Europe and North America. And of course the tensions that we have in East Asia. That apart we are still recovering from the covid shock. So, there is a great deal of stress in the global economy,” Sanyal said, adding that the Centre is continuously assessing the situation.

Also read: No “Hindu rate of growth,” consumer spending will drive India’s economic rise, says ING report