India’s GDP Growth Dips In Q3, But Ahead Of China: A Comparison Of The Two Big Asian Economies

India remains one of the world’s better-performing economies, with the government maintaining its full fiscal year projection of 7 per cent, after an upgraded 9.1 per cent for the previous 2021-2022 fiscal year.

New Delhi: India’s economic growth rate slowed down to 4.4 per cent in the third quarter of the current financial year (Q3 FY23), showed official figures that were released on Tuesday. In the previous quarter ended September 2022, the GDP growth rate was 6.3 per cent.

Despite a fall in the numbers, a silver lining about India’s growth is that it’s ahead of its neighbour, rival, and the world’s second-largest economy, China. As per Nikkei Asia, although India reports official figures only for financial years, a basic calculation of its quarterly results in 2022 shows an average growth of 7 per cent for the calendar year as well, far outpacing the 3 per cent China reported.

Also, India’s gross domestic product growth for the October-December period matched the Reserve Bank of India’s 4.4 per cent year-on-year estimate. Before the data release, 42 economists polled by Reuters had given a median forecast of 4.6 per cent.

India’s growth rate has been slipping ever since the country revised its first quarter (Q1 FY23) GDP growth to 13.2 per cent from 13.5 per cent,  from April to June. The figure for July to September (Q2 FY23) came in at 6.3 per cent and during October-December quarter, India’s GDP grew 4.4 per cent, according to the latest numbers.

However, India remains one of the world’s better-performing economies, with the government maintaining its full fiscal year projection of 7 per cent, after an upgraded 9.1 per cent for the previous 2021-2022 fiscal year.

Pointing out that China’s sharp slowdown appears to have been caused by the “very stringent lockdown that they had”, N.R. Bhanumurthy, vice chancellor of the Bengaluru-based Dr. B.R. Ambedkar School of Economics University, agreed that India did “far better” than China in the calendar year.

“They are also dependent heavily on exports,” which also fell, he told Nikkei Asia.

Devendra Kumar Pant, chief economist at India Ratings and Research, explained that “India is more [of] an internal demand story while China is an export-led [economy].”

Pant noted that countries “less integrated” with what happens in the global arena, such as the ongoing war in Ukraine, have not been impacted as much. “India has done better than China, there is no doubt about it,” he told Nikkei, saying that countries reliant on external demand have faced “more problems.”

China’s growth of 3 per cent in 2022 was less than half of the previous year’s 8.1 per cent rate, according to official data. That was the second-lowest annual rate since at least the 1970s after 2020, when growth fell to 2.4 per cent at the start of the coronavirus pandemic.

India also faced its share of challenges

As per the latest data for October-December, the manufacturing sector contracted by 1.1 per cent, declining for the second consecutive quarter. The segment shrank 3.6 per cent in the July-September term.

Inflation is also a persistent concern even as the Reserve Bank of India (RBI) is resorting to aggressive rate hikes to try and contain the pressures unleashed by Russia’s invasion of Ukraine.

In January, the retail inflation stood at a three-month high of 6.52 per cent — from 5.72 per cent in December — exceeding the Reserve Bank of India’s maximum tolerance level of 6 per cent. This was a setback after recent readings had shown inflation was cooling.

The RBI had increased the benchmark lending rate by 25 basis points to 6.5 per cent days before January’s inflation figure came out.