India’s economic indicators telling a story—of growth, recovery, robustness

June 6, 2023 at 10:36 AM

It’s been a long time since nearly all economic indicators have pointed upwards. With just two months of the new financial year having elapsed, this comes as a welcome dose of hope for the months ahead.

Month-ends are exciting times for financial journalists, and not just because of the pay day. Several ministries in the government, as well as private sector monitoring agencies, release a deluge of economic data on the first and last days of every month. This week, though, that deluge became a veritable flood since the end of May also coincided with the release of the GDP data not just for the January-March 2023 period, but also for the entire financial year 2022-23.

The better-than-expected GDP growth numbers even saw Prime Minister Narendra Modi tweeting that the data “underscore the resilience of the Indian economy amidst global challenges”.

“This robust performance along with overall optimism and compelling macro-economic indicators, exemplify the promising trajectory of our economy and the tenacity of our people,” he added.

The 7.2 per cent GDP growth for the Indian economy has come after a long spell of subdued numbers, lasting since before the pandemic, and is therefore a reassuring reminder of an era of high economic growth that India witnessed in the past and hints at the trajectory the economy could take from here. And that is why the Indian economy is ThePrint’s Newsmaker of The Week.

Putting numbers in context

Wednesday started with the release of the growth figures for the eight core sectors of the Indian economy–coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity–for the month of April 2023. The data itself was a mixed bag, with the overall growth of the eight sectors coming in at a six-month low of 3.5 per cent. A deeper look, however, revealed some good news for the Indian economy.

The fertilisers, steel, and cement sectors all saw double-digit growth in April. This indicates that, not only is the agriculture sector doing well, but the government’s push for infrastructure building is also boosting growth in key sectors like steel and cement, both of which have positive knock-on effects for the economy.

The crude oil and natural gas sectors saw contractions in production, but that’s not surprising, given India’s strategy to take advantage of relatively cheap imports from Russia.

At the same time, also on Wednesday, the Controller General of Accounts released data on the government’s revenue and expenditure for 2022-23. The key metric that catches people’s interest here is the fiscal deficit. Each time the CGA releases data, policymakers, commentators, and economists dive in to see whether the government is on track to meet its fiscal deficit target or not.

The fiscal balance, in layman’s terms, is the difference between how much the government earns and how much it spends. It’s a surplus if the government earns more than it spends, and a deficit if expenditure exceeds revenue. The government had set a target for its fiscal deficit to be 6.4 per cent of GDP in 2022-23. The data released on Wednesday showed that it had succeeded in meeting this target, another positive sign for the economy.

Running a deficit means that that deficit has to be paid for somehow. That ‘somehow’ is usually through borrowings. If the deficit is higher, then the government has to borrow more, which means its future burden of repaying these loans with interest is that much higher.

Showing that it can stick to its fiscal deficit plan, without letting expenditure balloon out of control, is a good indicator of the government’s fiscal discipline. There’s still a way to go before the deficit reduces to the 3.5 per cent medium-term target the government had set for itself, but being able to stick to its short-term targets is certainly a good first step.

GDP: the big daddy of indicators

Wednesday was not done yet; the main event came at 5.30 PM that evening. The Ministry of Statistics and Programme Implementation released the much-awaited GDP data for the fourth quarter of 2022-23 and also for the full year.

Soon after the data release, it became clear that the numbers were largely positive. Not only was the 7.2 per cent growth in 2022-23 higher than the 7 per cent the government itself had predicted, but this was made possible by a cross-sectoral strong performance in the fourth quarter.

Some headlines were quick to point out that the 2022-23 figure, while robust, was still lower than the 9.1 per cent growth in the previous year. What they were not as quick to point out was that the 9.1 per cent growth had come on the back of the pandemic year of 2020-21, during which the Indian economy actually contracted.

A 7.2 percent growth coming on top of a base of 9.1 per cent is a creditable performance, and a deeper look at the data revealed this to be true.

The agriculture sector grew at a very robust 4 per cent in 2022-23, with growth in each quarter surpassing the level seen in the previous quarter. In other words, not only was growth faster in 2022-23 than in 2021-22, but was accelerating even within 2022-23 itself. The manufacturing sector ended the full year with a seemingly poor 1.3 per cent growth, but that concealed some good news.

The sector grew 4.5 per cent in the fourth quarter of the year, emerging from two consecutive quarters of contraction, a relief and a seed of hope that maybe the private sector will begin to invest again. Time will tell if this is sustained.

The GDP number, however, also did raise a perplexing point, highlighted by Radhika Pandey in her Macrosutra column, and also by ThePrint Editor-in-Chief Shekhar Gupta in his Cut the Clutter programme. Seemingly contrary to anecdotal evidence that hotels, flights, trains, and restaurants are running full with long waiting lists, the data showed that household consumption was still low.

How could this be? The answer seems to be that, as the economy regains momentum, the first to begin spending are the rich. Those at the bottom of the pyramid are yet to open their purse strings, which is why metrics like two-wheeler sales remained dismal by the end of 2022-23. But the hope is that sustained growth will rectify this as well. (The Print)