India Q2FY23 GDP: Looking beyond the noise

The Q2FY23 GDP numbers are unlikely to change the policy focus of RBI from withdrawing accommodation, with growth being in line with expectations

Gaura Sen Gupta
Last Updated at November 30, 2022 22:27 IST

The pandemic, which was once in a lifetime shock, has made even relatively stable datasets such as GDP difficult to analyse. If one were to depend solely on year-on-year (YoY) growth rates, it would appear growth slowed to 6.3 per cent in Q2FY23 from 13.5 per cent in Q1FY23. However, the slowdown is partly a play of base effects, which have distorted the YoY growth momentum. To overcome the distortion, we look at a three-year compound annual growth rate (CAGR), which will compare recovery with the pre-pandemic period, or Q2FY23 over Q2FY20. On this metric GDP growth improved to 2.5 per cent in Q2FY23 as against 1.3 per cent in Q1FY23. This was despite tighter financial conditions, decline in company profitability and export growth slowdown. So, you may ask: How did growth improve in Q2? The answer lies in a combination of transmission lags, services growth recovery, and continued support from urban consumption.

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