India Dec quarter GDP growth stronger

MUMBAI: The apparent slowdown in India's GDP growth in the October-December quarter has been driven to a large extent by revisions to past data, economists said, adding that the growth is evolving on expected lines and may not sway the central bank to pause rate hikes.

India's GDP grew 4.4 percent in October-December, down from 6.3 percent in July-September, and below the 4.6 percent forecast in a Reuters poll.

The growth for 2021/22 was raised to 9.1 percent from 8.7 percent earlier as part of a regular schedule of revisions. Meanwhile, the contraction in GDP in 2020/21 was revised to 5.7 percent from an estimated drop of 6.6 percent previously.

These revisions led to a higher base on which growth for the October-December quarter was measured. Barring a revision, the GDP growth in the third quarter would have been 5.1 percent.

The lower-than-expected growth was led by an upward adjustment in the base year GDP, Pranjul Bhandari, chief India economist at HSBC said, adding that the level of output compared to pre-pandemic quarters continued to improve.

The level of output at the end of December 2022 was 11.6 percent higher than the pre-pandemic 2019 quarter, said Bhandari. This is an improvement from September, when output was 9.4 percent above the comparable pre-pandemic quarter, she added.

Citibank's India economists said the sequential momentum in growth held up in the third quarter, implying the economy is moving along the path seen in pre-Covid quarters.

The sequential real GDP growth of 3.5 percent was higher than the 3.3 percent average growth for Q3 in pre-Covid years, Samiran Chakraborty, chief economist for India at Citi, wrote in a note.

It "reaffirms our view that growth momentum remains close to pre-Covid levels," Chakraborty said.

Services outpacing manufacturing activity, and investments leading consumption remain the dominant narrative, economists at QuantEco Research said.

Some segments, especially private consumption and manufacturing, did show weakness even after accounting for data revisions.

Private consumption in the third quarter rose only 2.1 percent from a year earlier, a steep fall from the 8.8 percent growth seen in the second quarter. Without the revisions, growth in private consumption would have been 6 percent, said V. Anantha Nageswaran, India's chief economic advisor.

Private consumption growth between December 2019 and 2022 was at 14.8 percent, compared to a 15.2 percent growth between September 2019 and 2022, HSBC's Bhandari pointed out.

Among the key sectors, manufacturing shrank 1.1 percent in the third quarter, following a contraction of 3.6 percent in the previous three months. The sector would have grown by 3.8 percent in the third quarter without a revision in data, said Nageswaran.