New Delhi, May 26: The State Bank of India has released a research report, Ecowrap, indicating that the Indian economy is on track to exceed a 7% growth rate in Fiscal Year 2023, with manufacturing playing a crucial role in driving the expansion. The report suggests that India’s growth in the fourth quarter of FY23 is expected to reach 5.5%, leading to a projected overall growth of 7.1% for the fiscal year.
These figures align with the advance estimates released by the National Statistical Office (NSO) in January, which also forecasted a 7% growth for the year ending March 31, 2023. However, assessing the real rates of projected growth has become more challenging due to the varied patterns of growth observed globally. Policymakers, regulators, and economists are faced with unprecedented challenges in evaluating growth rates not only for 2023 but also for the subsequent years of 2024 and 2025, given the elongated inflation trajectory management by central banks following last year’s surprising events.
Despite these challenges, the SBI Research report highlights India’s determination to pursue a distinctive growth pathway, with a focus on resilient manufacturing and the promotion of enhanced efficiency in the services sector. The report further emphasizes that domestic consumption, investment, agricultural and allied activities, as well as credit growth, are expected to benefit locally. Additionally, the Union Budget 2023-24’s emphasis on capital expenditure is anticipated to attract private investment, strengthen job creation, boost demand, and enhance the country’s growth potential.
The Reserve Bank of India (RBI) has estimated the Real GDP growth for Q4FY23 at 5.1%, while the National Statistical Office (NSO) projects a full-year FY23 growth rate of 7%. Looking ahead to 2023-24, the RBI predicts GDP growth at 6.5%, with the first quarter (Q1) anticipated to reach 7.6%.
The SBI’s Ecowrap report utilizes an Artificial Neural Network (ANN) model based on 30 high-frequency indicators from key sectors to project GDP numbers. According to the model’s forecast, the quarterly GDP growth for Q4FY23 is expected to be 5.5%, leading to an overall GDP growth rate of 7.1% for FY23.
While the global economic landscape remains uncertain, the World Economic Outlook (WEO) report from the International Monetary Fund (IMF) in April 2023 revised the baseline growth forecast downward, with advanced economies expected to experience a significant slowdown. However, the report also suggests a decline in global headline inflation from 8.7% in 2022 to 7% in 2023, primarily driven by lower commodity prices.
Amidst these developments, India Inc continues to lead the economic turnaround, embracing improved operational and financial efficiency. The SBI Research Ecowrap report highlights that listed entities in Q4FY23 reported substantial growth in top-line revenue, with around 12% growth and approximately 19% growth in profit after tax (PAT) compared to the previous year. The same set of companies also witnessed a notable growth of around 23% in earnings before interest, taxes, depreciation, and amortization (EBITDA) during Q4FY23.
The report further notes positive signs of improvement in corporate margins during Q4FY23, which had been under pressure in previous quarters. Reflecting on the results of approximately 1,500 listed entities excluding banking, financial services, and insurance (BFSI), the report indicates an aggregate improvement in EBITDA margin from 13.96% in Q4FY22 to 14.34% in Q4FY23.
Furthermore, the SBI research report highlights emerging green shoots in foreign capital inflows into India’s capital markets, with year-to-date (YTD) foreign institutional investors (FIIs) inflows touching USD 6 billion in FY24. This represents a reversal of the trend observed in 2022.
However, the report also acknowledges the challenges faced by start-ups in accessing financing due to banking turmoil in the US, particularly the failure of niche banks. Nevertheless, this situation presents an opportunity for domestic financial institutions to support the financial needs of these start-ups, ensuring continued growth for India in a disruptive and disproportionate manner.
