GDP Lower Than Market Consensus, RBI May Lower Forecasts: Experts

The 1QFY23 real GDP and GVA at 13.5% and 12.7% YoY, were lower than market consensus. "RBI FY23 growth forecast will be downgraded to 6.7%, assuming no change in 2Q-4Q projections", Motilal Oswal has said in a note post the quarterly numbers.

Real GVA came at 12.7% YoY in 1QFY23, close to our forecast of 12.5%, but much lower than Bloomberg consensus of 14%. Real GDP growth came in at 13.5%, higher than forecast but lower than the consensus of 15.3%.

"Details suggest that while industrial activity was lower than expected, better services sector growth pushed overall GVA growth higher.From GDP perspective, private consumption grew much faster than expected, while govt consumption growth was lower and investments were only slightly higher," Motilal Oswal said in its note.

According to Madhavi Arora, Lead Economist, Emkay Global Financial Services, the GDP print for 1QFY23 was largely in line with its expectations, growing 13.5% (Emkay 13.8%; Consensus:15.5%), led by led by recovery in services sector. The strong YoY growth partly also is led by favourable base effect, as 1QFY22 growth was severely impacted by the Covid Delta wave.

"The GDP prints as a mixed bag , largely a story of service sector rebound which also was visible in the Pvt consumption print in the expenditure side. However, manufacturing has remained a disappointing print, while utilities have remained resilient since the pandemic normalized. The sharp uptick of around 26.7% in nominal GDP essentially reflects the higher deflator. Going ahead, we see secular downturn in the growth print ahead, as the base effect fades and the economy also slows sequentially. We maintain growth may remain at 7% for the year , albeit with the downside risk. Going ahead, even as recovery in domestic economic activity is yet to be broad-based, global drags in the form of still-elevated prices, shrinking corporate profitability, demand-curbing monetary policies and diminishing global growth prospects weigh on growth outlook," she stated.