Annual Economic Review: India's GDP rose 7.2% in FY 23 due to a strong fourth quarter

The
Indian government’s GDP increased to 7.2% in FY 23 thanks to a particularly
robust fourth quarter, according to the Annual Economic Review report released
by the Finance Ministry on Thursday. This is a significant increase from the
predicted 7% in February.

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According
to the research, quarterly consumption and investment trajectories after the
pandemic have already surpassed their pre-pandemic levels.

But
domestic consumption has rebounded since then, growing even stronger in FY23.
Finance Ministry reported that this allowed for a “near convergence”
of pre- and post-pandemic quarterly growth trends.

According
to the report, the economy did not benefit from external demand in the second
half of FY23.

Real
GDP growth rates before and after the pandemic are expected to converge once
external demand becomes effective. In FY23, the supply side met the demand
really well,” it said.

The
agriculture industry saw its highest quarterly growth rate in over a year. In
Q4, manufacturing led the industrial sector back to growth. The contact-heavy
service sector returned to its pre-pandemic size and depth by year’s end.

The
report found that increased employment levels boosted domestic demand.

In
India, the labour force participation rate (LFPR) increased during the
pandemic, continuing a pattern seen before the outbreak. In FY22, the
unemployment rate fell to a five-year low of 4.1%, increasing the employment
rate relative to the total population.

As
the economy has grown and more people have found jobs, the urban unemployment
rate has fallen in each quarter of FY23.

Increases
in employment are attributable in part to new policies enacted in recent years.
It said that by taking these steps, the corporate sector was bolstered, small
businesses were helped, the ease of doing business was enhanced, and foreign
investment was drawn into the country to boost the economy’s ability to
generate jobs.

There
will be a 40-45% transmission in lending and deposit rates by the end of FY23
thanks to the hike in repo rates, the report said of India.

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