Q3 GDP: Moderation In Growth Emerging From Private Consumption Slowdown

Moderation in India's Q3 FY23 growth is emerging from slowdown in private consumption which contributes 60% to the economic growth. The slowdown in private consumption could have emerged from sharp inflationary pressure.

Inflation average at 7% thus far in FY23, this potentially have dented the personal disposable income of the consumers which in turn has impacted the demand.
Sectorally, the growth rate in service sector which includes trade, hotels, transport, communication etc. which had shown signs of recovery in the previous quarter, as well softened in Q3 FY23. Service sector accounts to 55% of the GVA.

The sustenance in economic growth despite headwinds arising from inflation and increase in interest rates/lending rates has thus far been favourable for the housing sector. The trend is witnessed in construction sector GVA as well, which grew by 8.4% in Q3 FY23 vs 5.8% in the previous quarter.

In the coming months, hardening consumer inflation trajectory which could dent consumer disposable income however poses challenges to economic growth. However, despite the downside risks of inflation, amidst the global economic uncertainty, wherein the key economies are poised for a slowdown, India's economic growth is positioned to grow at the stronger pace.

(About the author: Vivek Rathi, is the Director- Research, Knight Frank India)