We Are Back To The Future

With GDP crossing pre-Covid level, economy is set to enter a good phase in medium term

- Soumya Kanti Ghosh

The expert consensus estimate on GDP growth rate for the first quarter of 2022-23 (Q1FY23) was around 15%. To that extent the 13.5% growth rate is a negative surprise. Nevertheless, at 13.5%, India’s GDP growth is 2.8 times higher than the average GDP growth for the 20 largest economies, which is 4.9%. India is still the good exception in a world already slowing down.

If we look at seasonally adjusted GDP growth, there’s a clear pick-up in economic momentum – quarter-on-quarter growth in Q1FY23 is 5.6%, the highest seasonally adjusted growth achieved in all first quarters since 2012-13.

Let’s now break down the GDP data to get a more nuanced picture.

All the good news

An interesting nugget first: Home sales in China have fallen for 11 months in a row, the longest slump since China created a private property market in late 1990s. In contrast, property sales in India are booming, registering 60% year-on-year growth in Q1FY23.

Turning to macro fundamentals:

Private consumption has improved on the back of good urban demand, which is getting support from contact-intensive services. Rural demand is likely to pick up pace.

Real private final consumption expenditure, which declined by Rs 4.77 trillion in Q1FY21 owing to the pandemic, is now 110% of the pre-Covid level.