Vijay Kumar Gaba

Last week, the National Statistical Office (NSO) released first advance estimates of the National Income for FY23. These estimates are important because the budget estimates for FY24 would be based on these estimates. The finance ministry will use these estimates to project the GDP, savings, tax revenue, expenditure and allocations for various sectors of the economy.

Some key highlights of the data released by NSO could be listed as follows:

FY23 real growth (2011-12 prices)

• GDP (at 2011-12 prices) may increase by 7% to against 8.7% in FY22. This estimate is marginally higher than the RBI’s latest estimate of 6.8%.
• Per capita GDP may increase by 5.8% to Rs1,13,967, in FY23, against a growth of 7.6% in FY22.
• Per capita private consumption may be Rs65,237, a growth of 6.6% over FY22.
• FY23 Nominal Growth (current prices)
• GDP may increase by 15.4% to US$3.3trn, against 19.5% growth in FY22.
• Per capita GDP may grow by 14.2% to Rs1,97,468 (US$2394), against a growth of 18.4% in FY22.
• Per capita private consumption may grow by 15.1% to Rs1,18,580 (US$1437) in FY23, against a growth of 16% in FY22

FY23 Sectoral growth (2011-12 prices)

• Agriculture growth may accelerate to 3.5% (FY22 – 3%)
• Manufacturing growth may collapse to 1.6% (FY22 – 9.9%)
• Mining growth to collapse to 2.4% (FY22 – 11.5%)
• Construction growth to slow down to 9.1% (FY22 – 11.5%)
• Public administration and Defence expenditure growth to slow down to 7.9% (FY22 – 12.6%)
• Electricity, gas, water and other utility services growth accelerate to 9% (FY22 – 7.5%)
• Trade, hotel, transport, communication etc. to grow faster at 13.7% (FY22 – 11.1%)
• Financial services, professional services and real estate to grow by 6.4% (FY 22 – 4.2%)

FY23 Production growth

·         Rice, cement, Oil & gas, steel, telephone subscriber, cargo at ports, air passengers, railways, exports, mining, manufactured products etc. may witness material slow down in growth.

·         Commercial vehicles, passenger vehicles, bank credit may witness higher yoy growth as compared to FY22.

Key observations

• The estimates are based on the data available till November 2022 and may go under significant revision when the first revised estimate for the full year will be released in May 2023. These estimates seem to assume sharp recovery in manufacturing and some slowdown in services in 2HFY23. However, it appears unlikely that the industrial growth will accelerate enough in 2HFY23 to achieve 4.5% real GDP growth in 2HFY23. The lagged impact of higher rates, tighter liquidity and slower global demand (exports) may actually be more pronounced in 2HFY23.
• These estimates may however allow the government to project buoyant tax revenue in FY24, and accordingly provide for higher government spending and improved fiscal position in the union budget to be presented on 1^st February.
• The NSO has projected a trade deficit of 4.6% of GDP for full year FY23 up from 2.5% in FY22. This is worrisome, as the exports are likely to slow down further in 2023 as the world struggles to avoid recession.
• Real per capita private consumption expenditure of Rs65,237 read with huge income inequality indicators, is inadequate to support self-reliance of citizens and higher growth. The pressure on the government to provide basic necessities like food, housing, education, healthcare etc. will only increase going forward. This will (i) constrict investment; (ii) hinder development of quality human resources; and (iii) lead to even more socio-economic inequalities.
• The good part is that buoyant growth may save the finance minister from making the unpleasant decision of hiking taxes.