India is forecasted to achieve the highest GDP (Gross Domestic Product) growth rate among major economies in 2023 amid the current gloomy global economic climate, according to a new report by GlobalData.
The data and analytics company said the growth would be driven by robust private consumption and investment, supported by government efforts to enhance infrastructure, logistics, and the overall business climate.
However, it noted that a decline in external demand may impact trade prospects this year.
Nonetheless, the country is expected to maintain a solid pace with a projected growth rate of 5.7%, representing a slight slowdown from the 7% growth experienced in 2022.
GlobalData's latest report, "Macroeconomic Outlook Report: India," showed that India's GDP grew by 6.1% on an annual basis in Q1 2023, surpassing the previous quarter's 4.5% growth.
It noted that private spending accelerated to 2.8% (from 2.2% in Q4 2022), public expenditure rebounded to 2.3% (-0.6%), and gross fixed capital formation increased to 8.9% (8%).
"The economic growth in Q2 and Q3 2023 is expected to be driven by private consumption, supported by a revival in rural demand and increased manufacturing activity supported by benign inflation," GlobalData said, adding that India's annual inflation rate dropped to 4.25% in May 2023, marking the lowest level since April 2021 and remaining closer to RBI's inflation target of 4%.
Maheshwari Bandari, economic research analyst at GlobalData, said the Indian economy "remained resilient amidst a global economic slowdown, driven by its robust domestic consumer market."
However, Bandari noted that the "persistently high petrol and diesel prices continue to burden households and businesses."
"Contrary to expectations, these fuel prices are expected to remain unchanged over the next quarter as oil marketing companies aim to recover losses incurred during periods of elevated crude prices," the analyst said.
In terms of sectors, financial intermediation, real estate, and business activities contributed 21.5% to the gross value added (GVA) in 2022, followed by mining, manufacturing, and utilities (20.0%) and agriculture (18.3%).
On the external side, GlobalData said India's exports in May 2023 declined by 10.3%, while imports fell by 6.6%, resulting in a trade deficit of US$22.1 billion.
This marks the fourth consecutive month of export contraction, posing challenges for economic recovery and the current account deficit.
Nonetheless, the data and analytics firm projects the exports and imports growth to slow down to 4% and 3%, respectively, in 2023 from 4.2% and 4.6% in 2022.
"Despite a decline in FDI from US$84.8 billion in FY2022 to US$71 billion in FY2023, there is optimism for a rebound as major US tech giants like Amazon, Google, and Microsoft announced significant investments during Prime Minister Modi's US visit in June 2023," the report further said.
"India's startup ecosystem has experienced remarkable growth, with a 15-fold increase in funding and a nine-fold rise in investors from 2015 to 2022. This influx of capital and investor confidence sets the stage for continued expansion, driving innovation, job creation, and economic growth of the country," Bandari said.