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India’s gross domestic product (GDP) growth is expected to hit a four-quarter high of 13% in the April-June quarter, on a weak base due to the second wave of the coronavirus pandemic. Covid-19 and a robust recovery in contact-intensive countries. services, according to the rating agency ICRA.

The rating agency projected year-on-year (YoY) growth in GDP and gross value added (GVA) at basic prices (at constant 2011-12 prices) in the first quarter of the fiscal year 2023 to 13% and 12.6%, respectively, a strong increase from the 4.1% and 3.9%, respectively, recorded in Q4 of fiscal year 22.

CIFAR expects sector growth in the first quarter of FY23 to be driven by the services sector, followed by manufacturing. However, GVA growth in agriculture, forestry and fishing is expected to decline to around 1% in the first quarter of FY23 from 4.1% in the fourth quarter of FY22, due to the negative impact of the heat wave in several regions of the country, which reduced wheat production. .

“The double-digit GDP expansion projected in the first quarter of FY2023 benefits from the low base of the second wave of Covid-19 in India in the first quarter of FY2022 as well as the robust recovery in the sectors contact-intensive following the expansion of vaccination coverage,” says Aditi. Nayar, Chief Economist, ICRA.

According to the ICRA assessment, there has been a shift in demand towards contact-intensive services from consumer discretionary goods for middle to high income groups. This, together with the incipient caution in export demand and the impact of high commodity prices on volumes as well as margins in the industrial sector, should result in relatively moderate industrial growth.

“The impact of the heat wave on the wheat crop is expected to cause weak growth in the agricultural sector in the first quarter of fiscal 2023. Overall, CIFAR expects GDP growth in first quarter of fiscal 2023 is lower than the 16.2% forecast by the Monetary Policy Committee (MPC), “says Nayar.

The recent moderation in commodity prices, Nayar adds, if sustained, should help ease inflationary and margin pressures and result in improved demand for discretionary goods and higher value-added growth, respectively. Based on this, CIFAR projects GDP growth in the second quarter of fiscal 2023 could be between 6.5 and 7.0 percent, beating the MPC’s forecast of 6.2 percent for that quarter.

The recovery in travel-related services has been upbeat since the start of FY23, benefiting from pent-up business travel demand and growing confidence in the use of leisure services amid declining the trajectory of Covid-19 infections.

In transportation, the rail and road sub-sectors are expected to show a healthy recovery in the first quarter of fiscal 2023, as indicated by healthy year-over-year growth in electronic rail freight and GST bills, according to the ICRA.

Overall, ICRA expects the GVA growth of trade, hospitality, transport, communication and broadcasting-related services to record base effect-driven expansion. 40-45% in the first quarter of FY2023, while trailing the pre-Covid level of the first quarter of FY20 by a low 2.5%.

The surge in global commodity prices, following the escalation of the Russian-Ukrainian conflict for much of the quarter, should have compressed demand for discretionary goods as well as corporate margins, thus impacting the growth of value added.

Central government investment, infrastructure and construction production and new project announcements showed encouraging trends in the first quarter of FY23, along with a strong backlog position of construction and construction companies. capital goods and the resilience of home sales, as evidenced by collected stamp duties, according to ICRA. .

However, project completions, state investment and production of capital goods were subdued, suggesting that the recovery in investment demand remained uneven, the report said.

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