India’s Real GDP Showed Growth of 8.7%, But It Was Lower Than Previous Estimate

India’s real GDP was 8.7 per cent for FY22, but earlier, it was estimated at 8.9 per cent. However, the fiscal deficit (difference between revenue and expenditure) was lower by 0.2 per cent.
India’s Real GDP Showed Growth of 8.7%, But It Was Lower Than Previous Estimate
India’s Real GDP Showed Growth of 8.7%, But It Was Lower Than Previous Estimate

The Russia-Ukraine war, which started almost three months ago, is still not yet resolved despite multiple diplomatic resolutions, and sanctions imposed upon Russia. Therefore, the top question which remains on the minds of most people, economists and others, in general, is “what is the endgame?” according to a report titled Monthly Investment Perspectives published by Validus Wealth. 

The report states that emerging market economies like India and others are relatively more prone to these global factors than developed markets like the West. However, with the unemployment rate falling to the year low, and inflation reaching multi-decade high, real wages in the hands of people have actually been negative. 

The report also noted that the UK consumer confidence has been shallow, and the business confidence has softened considerably, too, with the services sector being the major drag.

India’s MacroEconomic Condition

The report said that while India’s real gross domestic product (GDP) indicated a growth of 8.7 per cent in financial year 2022, it was lower by 0.2 per cent at 8.9 per cent, which was the earlier estimate.

For the financial year 2022, fiscal deficit or the mismatch between government revenue and budgetary expenditure, came in at 6.7 per cent, lower by 0.2 per cent than the previous estimate of 6.9 per cent. A lot of factors contributed to this positive development, namely, higher nominal GDP, increased tax collections, higher dividend income, telecommunication spectrum money receipts, and other higher non-tax revenues.

“Amidst the economic and political turmoil plaguing India’s neighbours on all borders, the Indian economy is relatively better placed in South Asia to strengthen the current recovery and improve macroeconomic prospects in the future. India is not only the best alternative to Russia and Ukraine for food security, but also a significant beneficiary of China+1 for manufacturing,” the report said.

The Indian economy is relatively better placed in South Asia to strengthen the current recovery

India’s Manufacturing Index

The manufacturing index is measured by the purchasing managers’ index (PMI), and a score of above 50 means expansion, while a score below 50 denotes contraction.

The report noted that the composite PMI for India rose by 0.7 to 58.3 in May 2022 when compared to the April 2022 figure of 57.6. This was the fastest expansion rate recorded since November 2021.

A lot of factors are responsible for such an increased PMI, the report said, but primarily it was led by three factors:

Service output increased despite cost side pressures.

Goods and services tax (GST) being above the Rs 1 trillion mark at Rs 1.4 trillion in May 2022.

The auto industry recovered partially in May 2022, led largely by passenger vehicles, commercial vehicles, and tractors. However, the two-wheeler segment’s demand remained downbeat, the report said.

Regarding the Rural India demand, the report said that the Indian Meteorological Department has revised the current southwest monsoon season to 103 per cent of the Long Average Period (LPA), and they also expect an overall normal monsoon in the coming weeks. 

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