India's GDP growth slows to 4.4% in Dec quarter on weakness in manufacturing

India's economic growth slowed further in the December quarter as a series of interest rate hikes by the country's central bank hurt demand and weakness in the manufacturing sector continued. Asia's third largest economy recorded year-on-year growth of 4.4% in October-December, down from 6.3% in July-September, data released by the government on Tuesday showed.

The growth rate for the third quarter of India's 2022/23 financial year was below a Reuters forecast of 4.6%.

Experts' opinion

Aditi Nayar, Chief Economist, ICRA, Gurgaon

"Springing a surprise, India's Y/Y GDP growth slid to a weaker-than-expected three-quarter low of 4.4% in Q3 FY2023, and printed below than the GVA (gross value added) growth of 4.6% for that quarter, amidst revisions in last year's data."

"Growth relative to the pre-COVID level rose quite appreciably to 11.6% in Q3 FY2023 from 9.4% in Q2 FY2023, indicating an improved albeit stubbornly uneven recovery."

Radhika Rao, Senior Economist, DBS Bank, Singapore

"Headline GDP was a shade below our estimate, even as the mix of drivers saw manufacturing decline but by a smaller extent, farm output hold up, construction rise as signaled by better cement as well as steel sales, while service growth moderated more than anticipated due to slower financial as well as real estate services and public administration."

"Core GVA, which excluded farm and government sector, slowed to 5.4% Y/Y from 6% in 2QFY, signaling softer private sector participation. In all, we see modest downside risks to our FY23 growth estimate of 7%."

Madan Sabnavis, Chief Economist, Bank of Baroda, Mumbai

"The major disappointment is negative growth in manufacturing, which can be attributed to weak P&L accounts of this sector. The Q2 results did indicate a fall in profits due to high input costs."

"Farm production is to grow by 3.7% which is on account of a good kharif crop. A revival in construction activity by 8.4% propped up low base was also supported by higher level of construction activity in both houses as well as roads."

"Service sector components continued to do well on the back of pent up demand especially in hospitality, travel, trade which led to growth of 9.7% over 9.2% last year." "We expect GDP growth for the year to be 6.8%."

Yuvika Singhal, Economist, Quanteco Research, New Delhi

"Q3 FY23 GDP data at 4.4% Y/Y has surprised on the downside with, yet again, manufacturing GVA growth remaining in contraction for the second consecutive quarter."

"Services and agriculture though lent support along with gross fixed capital formation on the expenditure side, though public administration and defense services expanded at the slowest pace in past two years."

"We continue to maintain our full year growth estimate of 6.8% for FY23, 20 bps below NSO's estimate. In addition, substantial revision to past data across FY21 and FY22, especially the latter to 9.1% Y/Y from 8.7% earlier, is likely to impart a downside to FY23 final numbers."

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, Mumbai

"GDP numbers for the third quarter are broadly in line with our expectations of 4.3%, but comes in the backdrop of several revisions."

"At 4.4%, the government has retained its full-year number of 7%. The fourth quarter estimate will need upward revision and we will have to look at the revised numbers in detail to get a sense of direction of GDP estimates."

Rupa Rege Nitsure, Group Chief Economist, L&T Financial Holdings, Mumbai

"While statistical base effect has pulled down India's quarterly GDP growth from 6.3% in Q2 to 4.4% in Q3, the overall growth picture is highly uneven."

"There is a significant deceleration in consumption growth - both for the private and government sectors. A possibility of additional interest rate hikes coupled with a slowdown in overall demand pose a further downside risk to manufacturing activity."

Kunal Kundu, India Economist, Societe Generale, Bengaluru

"India's 4Q22 real GDP grew by 4.4% Y/Y as against our expectation of 4.7%. However, the lower growth was mainly on account of upward revision of previous data point."

"The palpable weakness in domestic consumption that we have been highlighting for long is clearly evident in the data as consumption remained virtually unchanged in real terms and barely above the pre-COVID level, virtually three years since the onset of the pandemic."

"While investment recorded a modest increase, the drop in its share suggests anemic pace of business investment. For the full year, we do expect FY22-23 real GDP to grow by 7.0% Y/Y and then drop substantially next year to around 6.0%."

Madhavi Arora, Lead Economist, EMKAY Global, Mumbai

"The lower-than-expected quarterly numbers have been muddled amid sharp data revisions, usually seen with the release of this print each year. We had seen the same magnitude of revisions in the past two years, which were affected by COVID disruptions."