What does a strong Indian economy mean for FY23 growth?

India Q4 GDP growth of 6.1%
India Q4 GDP growth of 6.1%

by Tanushree Jaiswal Last Updated: Jun 02, 2023 - 12:19 pm 1k Views

When the GDP data for the fourth quarter and for FY23 was announced, it came in better than expected. At 6.2% for the fourth quarter and 7.2% for FY23, the growth was much better than expected. Clearly, the Indian economy grew at a much faster pace than expected in the fiscal year FY23, becoming the fastest growing large economies in the world by a margin. Here we are referring to economies with GDP of more than $1 trillion as of the latest fiscal year. In fact, the 7.2% growth for FY23 is higher than the 7% estimate of the government and the RBI. The growth came largely from the services sector.

What is really remarkable is the way the Indian economy has managed to weather the global economic shocks and continued on its growth path. Despite global headwinds like central bank hawkishness, slowdown fears and investment caution, the Indian economy has  shown a lot of resilience. However, RBI remains steadfast in its assessment of GDP growth at 6.5% in FY24, with pressure coming from weak global demand and tepid tech spending. After all, it is IT that has been one of the key drivers of services exports in the year gone by.

What is important about the year FY23 is that the GDP growth at a robust pace has come about despite some key challenges like higher interest rates and weaker real income growth. Also export driven sectors have been under pressure across the board with specific sectors like textiles and gems & jewellery taking it on their chin. What is likely to drive the pace of growth is specific government initiatives like enhanced allocation to infrastructure spending, and targeted policies to promote domestic manufacturing. One such example is the production linked incentive scheme or the PLI scheme for encouraging manufacturing in India. On the markets front, the impact is likely to be positive and that is already evident in the way the Nifty and the Sensex have rallied amidst strong FPI buying.

Strategically, it does look like the domestic-focused sectors would broadly perform better than those having global exposure. The story in the stock markets is going to be about banks, industrials, and consumption driven companies. These are likely to deliver strong earnings performance in the coming months and quarters. In fact, now experts are talking of the start of a multi-year stock market cycle in the markets, but for that we need to wait and watch.

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About the Author

Tanushree is a seasoned professional with 6 years of experience in the Fintech and Edtech industry.


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