Third Quarter GDP: Is Slower Recovery In India Turning Out To Be True?

The third quarter GDP for FY 222 at 5.4% was certainly a disappointment and much lower than estimates.

Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services says that it was in line with their forecast (of 5.3%) but lower than the market consensus (5.9%), real GDP growth came in at 5.4% YoY in 3QFY22.

Details suggest that final consumption (private + govt) grew 4.1%, while investments grew 7.1% last quarter. Within (real) investments, while government capex grew 40.4%, private capex is estimated to have grown only 4%.

"The full year FY22 estimate is revised down to 8.9% from 9.2% estimated in Jan'22, implying 4Q growth of 4.8%, also in line with our forecast.

Real GVA growth was only 4.7% YoY in 3Q, lower than our/market forecast of 5.2/5.7%. Industrial activities were almost flat, while services sector grew 8.2% YoY in the quarter.

Overall, 3Q GDP growth was lower than consensus, driven by weak consumption. With less than 5% growth expected in 4Q, our fear of slower recovery in India is turning out to be true," says Nikhil Gupta.

According to Madhavi Arora, Lead Economist, Emkay Global Financial Services the weaker growth in 3QFY22 reflected kicking in of high base effects kick in and consolidation of activity.
Growth was slower in mining and manufacturing, partly owing to supply chain disruptions, led by auto sector while sequential easing in corporate profitability also was reflecting a weaker quarter. Services led the 3Q growth, again helped majorly by government spending.

"The sub 9% GDP growth in FY22 revised estimates partly also captures past revisions. The economic recovery might see a minor bump down in 4QFY22 led by mild omicron wave, while the current geopolitical escalation may lead to potential global energy trade and price disruptions and weigh on growth. We assume the energy supply shock may resolve in coming months and likely will not leave a lasting mark on the global and domestic expansion. However, it would clearly have a near term negative impact. Going ahead, Fiscal and monetary support continue to nurture growth, especially as recovery in domestic economic activity is yet to be broad-based," says Ms Arora.