India’s gross domestic product (GDP) for the January-March quarter 2023 and FY23 shows a significant increase, despite facing many challenges. The country’s real GDP grew by 7.2% in FY23, which exceeded the government’s and Reserve Bank of India’s (RBI) predictions. However, this is less than the 9.1% growth seen in FY22. In Q4, GDP growth bounced back to 6.1% YoY, propelled by increased consumption spending and investments, as well as a decrease in imports. The overall pick-up in growth took place despite various global headwinds like elevated inflation, early signs of growth moderation in some advanced economies, and continued monetary tightening from significant central banks.
While there was a slowdown in private consumption spending in Q4, this was offset through an increase in capital expenditure (capex), which aided growth. Increased government infrastructure efforts and increased capital spending has resulted in the private sector investing in the country. The government is committed to this by increasing capex outlay by 37.4% YoY in the FY24 Union Budget. This, coupled with the easing of monetary conditions, makes it possible that the revival of the domestic capex cycle can do the heavy lifting for India.
Overall, although India still faces some headwinds, the economy has been resilient in the face of global obstacles. The nascent revival in the domestic capex cycle could be the saving grace that propels India’s economic momentum forward, especially as private consumption spending wanes, and the outlook for exports remains subdued amid the tepid global trade environment.
