GDP growth may have beaten MPC estimate of 6.3% in Q2, say most economists

The GDP numbers for the second quarter of the current financial year are scheduled to be out by this month end

The gross domestic product (GDP) may have grown in the range of 6.3 per cent to 7.2 per cent in the second quarter of the current financial year against 13.5 per cent in the first quarter, largely due to the normalisation of the base effect, say economists.

The economy expanded 8.4 per cent in the second quarter of the previous financial year.

The GDP numbers for the second quarter of the current financial year are scheduled to be out by this month's end. 

Most economists pegged the GDP growth rate at 6.5 per cent. The Reserve Bank of India's monetary policy committee (MPC) had projected it to be 6.3 per cent.

One of those, CRISIL chief economist D K Joshi said the drop in growth is largely base effect driven.

"Revival of contact intensive services, consumption demand and public investment supported growth in Q2. The high base effect will weigh on growth in the second half as well," he said.

Icra Limited's chief economist Aditi Nayar said economic activity in the second quarter of this financial year benefitted from robust demand for contact-intensive services, healthy capital spending by the union government and pre-festive season stocking of goods.

"The downsides emanated from the mixed crop output trends revealed by the advance estimates of kharif production, adverse input cost movements for certain sectors with a higher fuel intensity, as well as the impact of flagging external demand on non-oil merchandise exports," she said.

Jahnavi Prabhakar, an economist at Bank of Baroda, said even as the global economy is slowing down owing to the geopolitical conflict at play, and aggressive monetary tightening by global central banks, among others, India's economy is growing at a steady pace on the back of strong fundamentals.

She also attributed the reason for slower economic growth in the second quarter compared to the one in the first quarter to the base effect.

She said the services sector is expected to hold the key to the revival. With this, the Indian economy is poised to grow by 6.8 per cent in FY23 compared with a growth of 8.7 per cent in FY22, she said.

India Ratings chief economist Devendra Pant, who predicted the highest growth of 7.2 per cent for the second quarter of this fiscal year, said the base effect is slowly going away.

"Higher inflation is having its impact on consumption demand. While government capex is strong, the private capex is likely to remain weak. Higher commodity prices and weak currency will also have an impact on pulling down GDP growth," he said.

According to QuantEco Research economist Yuvika Singhal, who projected the economy to grow by close to 6.3 per cent during the quarter, the growth was led by a recovery in the services sector amidst a complete opening up of the economy, especially contact-intensive sectors.

"Manufacturing in comparison is likely to see a lower growth momentum with IIP (the index of industrial production) for both consumer durables and non-durables contracting in the quarter. This underscores some possible downside in consumption, amid elevated inflation, lagged advancement of rainfall and sowing in Q2 FY23," she said.

Having said so, improvement in capacity utilisation is likely to have sustained into Q2, supporting investment demand as reinforced by stronger performance of capital goods production and imports, she said, adding that higher government spending, led by capex, is also likely to have offered support.

She further said that growth in capex spending at 49.5 per cent in the first half of the current financial year on an annualised basis is the highest run rate seen over the last decade or so.

Looking ahead, for Q3 of FY23, while festive/pent-up demand and some moderation in inflation/input prices are likely to pan out, headwinds from lingering geopolitical tensions, tightening global financial conditions and downside to global growth could more materially weigh on growth prospects, she said.

The October-22 sequential downside in exports to the tune of 16 per cent can be seen as a prelude to the impending slowdown, she said, adding, "For the full year, we continue to hold on to our GDP growth estimate of 6.8 per cent."



The economy grew 20.1 per cent in the first quarter of the Covid second wave hit 2021-22 and 8.4 per cent in the second quarter. This may prompt many to say that the base was smaller in the second quarter of 2021-22, and hence the growth should be higher in the second quarter of the current financial year than the 13.8 per cent witnessed in the first quarter. However, the growth of 20.1 per cent in Q1 2021-22 came on the base of a massive 23.8 per cent contraction, while the growth of 8.4 per cent in the second quarter of the year came on the contraction of 6.6 per cent. That is why the GDP growth in the second quarter of this year would have seen the base normalisation.