Key highlights

• According to the National Statistical Office estimates released on August 31, 2022, India’s real gross domestic product (GDP) grew 13.5% on-year in the first quarter (Apr-Jun) of fiscal 2023, a tad lower than our expectation of 15.2% and the Reserve Bank of India (RBI) estimate of 16.2% and 20.1% in the first quarter of fiscal 2022
• We note that the economy was first hit by the pandemic during the first quarter of fiscal 2021 and again affected in the second wave by the delta variant in the first quarter of fiscal 2022. In contrast, there was no pandemic-led disruption in the first quarter of this fiscal. Hence, first quarter data of this 2023 continues to be statistically boosted by the favourable base effect. Despite headwinds due to the Russia-Ukraine conflict, the growth momentum (in seasonally adjusted terms) improved sequentially during the quarter
  
• On the demand side, private final consumption expenditure (PFCE) registered strong growth of 25.9% on-year in the first quarter of fiscal 2023. Healthy growth was partly driven by a low base. PFCE rose to Rs 22.08 trillion in the first quarter of this fiscal from the corresponding pre-pandemic level of Rs. 20.09 trillion in the first quarter of fiscal 2020. The share of PFCE in GDP (in real terms) rose sharply to 59.9% in the first quarter of fiscal 2023 from 54.0% in the same quarter the previous year. The spurt in PFCE growth (see Chart 3) reflects pent up demand, especially for contact-based services, thanks to ebbing of the pandemic impact amid rising vaccinationcoverage. Further, goods demand also seems to be on the rise as reflected in high real import growth in the first quarter of this fiscal
  
  Had it not been for high inflation (CPI inflation of 7.3% in the first quarter of this fiscal the highest since the onset of the pandemic) and subdued rural demand due to negative real rural wage growth, private consumption would have grown faster.