New Delhi: The International Monetary Fund (IMF) recently called India a 'bright spot' in the World Economy and said the country was expected to contribute 15% to global growth this year. Kristalina Georgieva, the Managing Director of the IMF in an interview predicted the country’s growth rate to be 6.8% for FY23.
She noted that this growth rate is the fastest among major economies. Georgieva attributed India’s strong growth to factors such as digitization, prudent fiscal policy, and significant financing for capital investments in the upcoming budget.
Highlighting India's strong resurgence a recent report by SBI Research has carried out an analysis of 30 high-frequency economic data sets showing that the country’s economy would clock a growth rate of 5.5% in the fourth quarter (January-March 2023 period) of the last financial year, taking the annual GDP growth to be above 7 percent in the fiscal.
GDP growth estimates by other official agencies such as the Reserve Bank of India and the country’s apex statistical organization paint a slightly different picture of GDP growth in the FY 2022-23. India’s financial year begins in April and ends in March next year. While the RBI has estimated the fourth quarter GDP growth to be 5.1%, the National Statistical Organisation (NSO) projects the annual GDP growth rate in the last fiscal to come at around 7 percent.
But with the SBI Research projecting a higher growth rate for the fourth quarter, the annual GDP growth rate is expected to be 7.1%
India, a bright spot among emerging economies
According to World Economic Outlook (WEO) report by the International Monetary Fund, the global GDP growth rate will decline to 2.8% in 2023 as against a growth rate of 3.4% clocked in 2022. The IMF’s forecasts suggest that the global growth rate would settle at 3% in the next year.
The reason behind this sharp decline in the world GDP growth from 3.4% to 2.8% is the weak economic situation and recessionary pressures in advanced economies such as the European nations and the USA. While Germany entered in technical recession phase as its GDP has contracted in the last two quarters – October to December 2022 and January to March 2023 period.
Similarly, as per some estimates, the world’s largest economy, the USA, is expected to enter a formal recession later this year. Rich countries such as the USA, European countries, and Japan are expected to see their economic growth rate decline to 1.3% this year from 2.7% in the previous year. Interestingly, the world’s second-largest economy, China’s GDP is expected to witness a rebound, growing at 5.2% in 2023 and 4.5% in 2024, compared to 3.0% in 2022
Indian companies return to profitability
According to the latest corporate results of around 1,700 listed companies, their turnover, reflected in the topline, recorded a growth of 12 percent compared to their topline during the same period last year. Similarly, the profit after tax (PAT) of these companies recorded a growth of 19 percent during the fourth quarter as compared to their profit after tax during the same period last year.
Moreover, these same set of companies reported a healthy 23 percent growth in their Earnings before Interest Depreciation Taxes and Amortization (EBIDTA) in the fourth quarter of FY 2023 as against the their EBIDTA margins during the same quarter of FY 2022.
Corporate results of these entities, which excludes companies from banking, financial services and insurance sectors, for the fourth quarter (January-March 2023 period), shows that both top line and bottom-line growth of around 10%, while EBIDTA grew by 7% as compared to their growth during the same period of the previous fiscal.
“It is pertinent to mention that corporate margin, which was continuously under pressure for last few quarters, shown sign of improvement in Q4FY23,” said Soumya Kanti Ghosh, Group Chief Economic Adviser of State Bank of India. Ghosh says that the results of around 1500 listed entities ex BFSI sectors, EBIDTA margin, on aggregate basis, improved from 13.96 percent in the fourth quarter of FY 2022 to 14.34 percent in the fourth quarter of FY 2023.
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