Will India's real GDP growth in FY23 be mellower than projected?

The Economic Survey 2021-22 projected the real GDP growth rate at 8-8.5% for FY23.

However, both the government and the RBI have moderated growth expectations for FY23 in the short time period since then.

Last week, Finance Minister Nirmala Sitharaman said that the Centre’s GDP deflator projection for FY23 is 3 to 3.5%. What this means is that the central government’s real GDP growth projection for FY23 is in the range of 7.6 to 8.1%.

This is based on the fact that the Union Budget has assumed a nominal GDP growth rate of 11.1% for FY23.
GDP deflator, which is a measure of inflation, is also the difference between nominal GDP and real GDP.

Also last week, the RBI projected GDP growth for the next fiscal year at 7.8% – again, lower than what the Economic Survey had projected.

The Survey’s growth projection for 2022-23 is based on the assumption that there will be no further pandemic-related economic disruption, withdrawal of global liquidity by major central banks will be mostly orderly, the monsoon will be normal, global supply chain disruptions will ease as the year progresses, and oil prices will be in the range of $70 to $75 per barrel.

The government and the RBI are also aware of the fact that lagging private consumption could prove to be a sore point.  

There might also be a chance that the government has been conservative when it comes to its GDP deflator projection.  

Keeping the differences in the various projections aside, India will hopefully see a durable and broad-based economic recovery in FY23. However, as things stand at present, energy prices and geopolitical tensions could prove to be spoilers.

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