What the GDP numbers show

Slowing growth and key data revisions will shape economic challenge, political strategy

The latest Gross Domestic Product (GDP) data – that for the October-December quarter of 2022, the third quarter (Q3) of 2022-23 – and revisions to GDP data of 2019-20, 2020-21, and 2022-23 were released on Tuesday, with the numbers holding relevance for both economic policymakers and political strategists.

The GDP numbers for the last three years have been revised (as expected). (Shutterstock)

First, the economics. At 4.4% (year-on-year), GDP growth for Q3 came in below the consensus estimates of 4.7%, and the economy will have to expand by 5.1% in the current quarter (Q4) to meet the 7% estimate for 2022-23 growth that has been retained. That could be a challenge. Services and investment continue to power the Indian economy, with manufacturing remaining a laggard and consumption growing by an anaemic 2.1%. Policy planners have been speaking of signs of a consumption revival, but it is becoming clear that there hasn’t been one and that the bump that came from revenge spending is now over. Since the pandemic, it is the government’s investment push that has kept the economy going, and given the focus of Union Budget 2023-24, that is likely to continue.

Second, the politics. The GDP numbers for the last three years have been revised (as expected). Based on these, the economy grew by 3.9% in 2019-20 (the previous number was 3.7%); contracted by 5.8% in 2020-21 (the previous number was 6.6%); and grew by 9.1% in 2021-22 (the previous number was 8.8%). So, GDP numbers have been revised upwards for the last three years. Usually, such upward revisions in an economic context such as the one playing out today, would have meant a downward revision in the current year, but this estimate (7%) has been kept the same. The government’s political strategists will take heart from these numbers because they speak well of the second Narendra Modi government’s ability to manage the economy in a year of several key state elections and ahead of the national elections in 2024.

To be sure, these revisions, and the substantial number allocated under discrepancies (the difference between alternative methods of calculating GDP), make the current data release difficult to read, but the broad message from it is that the challenges for economic policymakers remain the same, and the numbers political strategists can build their campaign around look better than they previously did.