According to estimates from the National Statistical Office published on August 31 and representing the strongest growth in four quarters, India’s Gross Domestic Product (GDP) increased by 13.5% in the first quarter of 2022–23, while the economy’s Gross Value Added (GVA) increased by 12.7%.
Due to the base effects from the more severe initial COVID-19 lockdowns, the equivalent April to June quarter of last year had seen GDP growth of 20.1% and an increase in GVA of 18.1% during the second COVID-19 wave. According to economists, the headline growth rate will slow down in the current quarter as base effects diminish and continued concerns about global economy and local inflation persist.
GDP growth was boosted by private final consumption expenditure, which increased to 59.9% of GDP from 54% in Q1 of 2021–22 and Gross Fixed Capital Formation (GFCF), which measures capital investments in the economy, even though the government’s share of final consumption expenditure in GDP moderated to 11.2% between April and June from 12.6% last year. From 32.8% of GDP in Q1 of 2021–2022, the GFCF share increased to 34.7% of GDP in Q1 of this year.
According to the Finance Ministry, the government’s reforms and initiatives to rekindle capital investments and increase consumption helped the GFCF and private consumer expenditure in the first quarter reach their greatest levels in the previous ten years.
The Reserve Bank of India (RBI) was compelled to raise rates despite its reluctance since retail inflation is expected to remain high for the remainder of 2022, exceeding the upper bound of the central bank’s medium-term target of 2–6% this year.
In addition to issuing a caution over the effects of a global slowdown on local development prospects, the RBI increased its benchmark repo rate by 140 basis points since May, including 50 basis points this month.
Despite the fact that monthly inflation has declined over the previous three months, the cost of food and fuel has increased dramatically, which has had a considerable impact on consumer expenditure, which accounts for about 55% of economic activity.
Other data releases for India on Wednesday revealed that in July, the core sector output—or the output of the infrastructure factories—rose 4.5% year over year.
In comparison to the same period last year, production growth in the eight infrastructure sectors of coal, crude oil, natural gas, refinery products, fertiliser, steel, cement, and power increased by 11.5% from April to July of this fiscal year.