India’s GDP to grow at 4.6% in Q3 FY23

India’s GDP (gross domestic product) will grow at 4.6% in Q3 FY23, the data based on SBI Artificial Neural Network (ANN) model shows after its forecast for the past two quarters showed “precise” estimates. SBI’s Q3 GDP forecast of 4.6% is higher than the RBI estimates of 4.4% for the quarter.

The SBI Research report says the FY23 GDP forecast could see an upward revision from the current 6.8% towards 7%, as it also anticipates revisions in GDP data for FY20, FY21 and FY22 that will be released on February 28.

SBI’s ANN model is developed with 30 high-frequency indicators. The report says corporate results, ex BFSI, for Q3FY23 shows degrowth in EBIDTA by 9% YoY against 18% EBITDA growth in Q3 FY23, though the top line continued to grow at a healthier pace. Net sales grew by 15% in Q3 FY23, the while bottom line was down by around 16%.

“Corporate margin seems to be under pressure – reflected in the results of around 3,000 listed entities ex-BFSI – on account of higher input costs with decreasing EBIDTA margin, on an aggregate basis, from 15.3% in Q3 FY22 to 11.9% in Q3 FY23. These could pull down the manufacturing growth in Q3 FY23.”

Meanwhile, the wide gap between the job vacancy rate (currently at 6.7%) and the unemployment rate (currently at 3.4%) in the US currently indicates a strong labour market. Additionally, says the note, geopolitical uncertainty continues to rattle the global economic landscape, with the Russian aggression into Ukraine completing a year this week. “We witness a domino effect coming in full force as tensions of formidable momentum, with meaty consequences for growth and prosperity for a majority of the world take centre stage”.

The SBI report comes a day after ratings agency ICRA said India's GDP growth in Q3 FY23 is expected at 5.1% owing to a base effect-led moderation from the 6.3% recorded in Q2 FY23. “Economic activity in Q3 FY23 remained distinctly uneven, amid the upsides offered by the robust demand for contact-intensive services and upbeat sentiment during the festive season,” says Aditi Nayar, chief economist, ICRA.

The Reserve Bank of India had earlier slashed India’s GDP growth forecast for FY23 to 6.8%. The central bank expects Q3 FY23 GDP growth at 4.4%. “Headwinds emanating from protracted geopolitical tensions, global slowdown and tightening of global financial conditions will slow India’s GDP growth,” the RBI said earlier.

After hitting double digital growth in Q1, India's economy grew at 6.3% in the July-September quarter of 2022-23 as compared to 8.4% in the same period last year, mainly due to the lack of a favourable base effect.

Meanwhile, the global financial body IMF (International Monetary Fund) said in its latest report has said China and India alone are expected to contribute more than half of global growth this year, with the rest of Asia contributing an additional quarter.