NSO’s little less great expectations

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The National Statistics Office (NSO), in its first advanced estimates released on Friday, expects the national GDP will grow 7% in 2022-23, against 8.7% in 2021-22, broadly in line with the Reserve Bank of India‘s (RBI) latest projection of 6.8%. The official estimate ahead of the budget next month serves as a marker for the government’s fiscal stance although, being based largely on extrapolation, it undergoes several revisions. Agriculture is expected to post 3.5% growth, half a percentage point higher than in the prior year in the face of an uneven monsoon and a surge in global fertiliser and food prices. Manufacturing will come off 9.9% growth in 2021-22 to 1.6% in 2022-23, while services are expected to add 2 percentage points to growth over 2021-22. This is on account of the lagged reopening of services from pandemic restrictions and input cost inflation and partial demand recovery in manufacturing.

On the demand side, consumption growth is flat-lining at 7.9% in 2021-22 and 7.6% in 2022-23 as government spend climbs from 2.6% to 3.1% as percentage of public spending. Investment will decelerate much faster, growing 11.5% in 2022-23 against 15.8% in the previous year. Export growth is expected to nearly halve from 24.3% in 2021-22 to 12.4% in 2022-23, reflecting the surge in demand for goods during the pandemic and a subsequent diversion to services followed by a global slowdown. Imports are also coming off their 35.4% growth rate in 2021-22 to 20.8% in 2022-23 on a climbdown in commodity prices as the economy slows and demand for re-export is squeezed.

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The estimates bring out the policy focus on capital expenditure with a strong growth in investment on a high base of the previous year. Similarly, it captures the worsening external environment through volatility in net exports, also on the high base of 2021-22. Consumption revival is tied to both investment and exports. Policy should focus on improving outcomes here.

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