INDIA'S GDP GREW 13.5% IN THE FIRST QUARTER - WHAT DO ANALYSTS HAVE TO SAY?

The gross domestic product (GDP) of India grew 13.5% in the first quarter of the current financial year (April-June), compared with 4.1% in the previous quarter, according to official data released Wednesday.

Though the Q1 growth was lower than the Reserve Bank of India's estimate of 16.2 percent for the first quarter of 2022-23, it was the fastest growth in a year in the Indian economy. It is estimated that India's real Gross Domestic Product (GDP) will reach Rs 36.85 lakh crore in the year 2021-22 with 2011-12 as the base. During the first quarter of 2021-22, the GDP was 20.1 per cent.

What are the views of the analysts and experts on the latest GDP data?

From a GDP perspective, Nikil Gupta, Chief Economist at MOFSL group, stated that private consumption grew much faster than expected, while government consumption growth was lower and investments were slightly higher. In the first quarter, RBI expected 16 percent growth, with subsequent quarters of 6.2/4.1/4 percent growth. Based on today's Q1 data, RBI's FY23 growth forecast is likely to be revised down to 6.7% from 7.2% earlier this year. We, on the other hand, have revised our forecast to 6.5%, up from 6.3%.

This data confirms that India's growth recovery isn't strong, and ideally implies that monetary tightening shouldn't be too aggressive; however, this cycle seems to indicate that the terminal repo rate will be 5.75-6 percent with 1-2 more rate hikes, ending the cycle in December.

Founder and CEO of Millwood Kane International — an investment consulting firm, Nish Bhatt said, While Q1 GDP data of 13.5% may appear high, it's lower than most forecasts, and the pandemic did not negatively affect this quarter at all. The lower than expected data is due to private consumption.

There was an increase in contact-oriented services, hotels, and trade, and it is encouraging to see an increase in agriculture output, but the manufacturing segment dragged down the overall data, and the construction sector showed higher demand for cement, steel, and other related products.

As the base effect fades and the economy slows sequentially, we expect a secular downturn in the growth print for manufacturing, where the print has remained disappointing, while utilities have remained resilient.

As a result of the global demand slowdown, India's economy will face headwinds in the coming months, mainly from a widening trade deficit. Furthermore, tightening borrowing costs and elevated input costs could hinder investment in the economy.

In spite of global recessionary trends due to ongoing geopolitical crises and a highly volatile global financial market, India's economy grew steadily; however, some base effects can be seen in the GDP data, but overall recovery was aided by growth in core sectors, pent-up demand in various sectors like real estate, retail, and hospitality, and increased personal mobility.

The expansion of vaccination coverage also contributed to the progress of the recovery. The real estate sector, in particular, remains optimistic.