Will The Growth Sustain?

India recorded a 7.2 per cent growth in gross domestic product (GDP) in the 2022-23 fiscal—exceeding, if marginally, what most economists had anticipated and the Centre’s own estimate of 7 per cent.

- M.G. Arun

A major contributing element behind this gentle elevation on the graph has been the 6.1 per cent GDP growth in the last quarter of the fiscal (Q4), which was quite a bit higher than the widely expected 5 per cent. How to read this good news? By all accounts, it’s best that optimism be tempered. There is concern on how sustainable this growth actually is, given that it reflects pent-up demand from the pandemic years. In fact, these numbers are still lower than the 9.1 per cent recorded in FY22, and that number was itself inflated, coming after a contraction in growth (-6.6 per cent) in FY21.

“There is no reason to get ecstatic over the 7.2 per cent growth...,” says Madan Sabnavis, chief economist with the Bank of Baroda (BoB). “We are not [yet] in the 8 per cent range we had achieved in the early part of the last decade.” The Indian economy’s growth trajectory has been talked up a bit of late, especially against the backdrop of a slowing global economy reeling from the effects of the Ukraine war for well over a year now. Sabnavis strikes a cautionary note again, saying some of the comparative parameters are incorrect, as “some smaller countries are doing better than us”. “The question is whether we are creating more jobs, more income or pulling more people out of poverty,” he says. Also, the Indian economy’s compounded annual growth rate (CAGR) between FY19 and FY23 has been just 2.7 per cent, he adds.