The services sector is expected to rebound with YoY growth of 9.4 per cent in 2022-23 compared to
8.8 per cent in 2021-22, driven by a recovery of the contact-intensive service sector (trade, hotels, transport, communication and services related to broadcasting) which is likely to witness the highest growth of 14.2 per cent on account of the release of pent-up demand, the report said.
The industry sector is likely to witness modest growth of 3.6 per cent in 2022-23 compared to strong growth of 11.6 per cent in 2021-22, possibly because of input cost-push pressures, supply chain disruptions and China lockdown affecting the availability of essential inputs and slowing global economy, the report said.
According to National Statistical Office’s second advance estimates, India’s GDP is projected to grow by 7% in 2022-23. This is a downward revision from estimates of 8.0-8.5% growth forecast by the Economic Survey of 2021-22. “Persistently high inflation, tightening financial conditions, supply chain disruptions due to ongoing geopolitical tensions and a slowdown in China have resulted in a downward revision of the real
GDP growth rate in comparison to the Real GDP growth rate forecasted in Economic Survey 2021-22,” the ministry said in the report referring to the growth headwinds.
The Ukraine-Russia conflict disrupted the global supply chains and led to a spike in prices of critical commodities, leading to uptick in inflationary pressures. To restrain the consequent inflation, major central banks around the world undertook monetary tightening resulting in tightening of financial conditions.
As a result, increased borrowing costs and stubbornly high inflation is now getting reflected in multiple
leading indicators of global economic activity. The finance ministry said that gGlobal developments have posed downside risks to India’s growth and overall macroeconomic stability as well. “The impact was seen in the first half of 2022-23, in the
widening of the current account deficit (CAD), uptick in retail inflation, the outflow of portfolio investments, and the appreciation of the US dollar against the rupee,” the report said.
In the second half of 2022-23, the report said, retail inflation has fallen below the tolerance ceiling, portfolio investments have started to return, the rupee has stabilized against the US dollar but export growth has declined with the slowing of global growth.
However, despite the unfavourable developments, the report notes, Indian economy continues to be one of the fastest growing major economies in 2022-23, which is a reflection of India’s underlying economic resilience and strong macroeconomic fundamentals.
Gross Fixed Capital Formation (GFCF), a crucial barometer to measure the growth of the productive capacity and economic development is estimated to grow at 11.2% in 2022-23, supported by various reforms and measures taken by the government leading to the reinvigoration of the capex cycle and crowding-in of private investment, the report said.
The government has continued to support the investment activity with capital expenditure reaching Rs. 5.7 lakh crore during April-January 2023, which is 29% higher than last year’s corresponding period. Private
investment also picked up in 2022-23, partially driven by increased public capex and because of the strengthening of the balance sheets of the corporates and the consequent increase in credit flow, the report said.
Exports are estimated to grow at 11.5 per cent in 2022-23 despite sustained supply chain disruptions and an uncertain geopolitical environment. The share of exports in GDP (at 2011-12 prices) also increased to 23.1 per cent in 2022-23 compared to 22.1 per cent in 2021-22, according to the report.
On the supply side, agriculture, forestry and fishing continues to lend support to economic growth
and are expected to witness YoY growth of 3.3% in 2022-23. The growth in the agriculture sector is likely
to remain buoyant, supported by healthy progress in Rabi sowing. This has led to a recovery in the rural economy, the report said.
Credit growth has been broad-based across sectors, the report notes, with retail credit driving the growth primarily owing to rising demand for home loans.