India's Q2 FY23 GDP Growth Pegged At 6.3%; External Slowdown Poses Chief Risk To H2 Growth: ICRA

ICRA Research Report

With a normalising base effect related to the waning of Covid 2.0, India's gross domestic product growth halved to 6.3% in Q2 FY23 from 13.5% in Q1 FY23 in YoY terms, printing similar to our forecast (up 6.5%).

However, relative to the respective pre-Covid quarters, the pace of growth doubled to 7.6% in Q2 FY23 from 3.8% in Q1 FY23, which we believe provides a more meaningful gauge of the underlying momentum of economic activity.

The YoY GDP growth in Q2 FY23 was boosted by the performance of private final consumption expenditure (up 9.7%) and gross fixed capital formation (up 10.4%), whereas government final consumption expenditure ( down 4.4%) displayed a contraction, and net exports exerted a deeper drag.

The gross added growth of 5.6% in Q2 FY23 trailed our forecast (up 6.3%) by a wide margin.

While the services sector (up 9.3%) expectedly stood out as the clear driver of the GVA growth in Q2 FY23, the 4.6% growth in agriculture, forestry and fishing seems somewhat optimistic, based on the decidedly mixed YoY trend revealed by the first advance estimates of the kharif crop, that were followed by unseasonal heavy rainfall towards the end of the monsoon season.

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