Saudi Arabia will be the fastest-growing major economy in 2023.

Listen to the article:

This year, India will no longer be the major economy with the fastest growth rate. This is because growth has slowed due to less demand at home and abroad.

The first official estimate for the fiscal year that ends in March says that the gross domestic product will grow by 7%. This estimate was released by the Statistics Ministry on Friday. This is different from what the Reserve Bank of India and the median estimate of economists in a Bloomberg poll said would happen.

This follows a rate of growth of 8.7% the year before. It will be second only to Saudi Arabia, which is expected to grow by 7.6%, thanks to gains from a rise in energy prices.

The Indian government uses the advance estimate to decide how to spend money in the federal budget that will be released on February 1. This will be Prime Minister Narendra Modi’s last full-year spending plan before elections in 2024.

Aditi Nayar, an economist at ICRA Ltd. in New Delhi, said, “The main numbers are about what we thought they would be.” She also said that strong, but mixed, domestic consumption should be able to ease some of the pain caused by weak exports.

India’s current fiscal year got off to a good start, and people hope that pent-up demand will help Asia’s third-largest economy get better. But the optimism didn’t last long because central banks tightened monetary policy in a way that had never been done before to stop high inflation. This is pushing many developed economies toward recession and slowing growth in others.

So far this fiscal year, the Reserve Bank of India has raised its benchmark rate by 225 basis points, but it’s not done tightening. Most economists think that the central bank will raise interest rates by another quarter point at its next policy review on February 8. Core inflation has stayed steady, so this is what most economists expect.

The #data indicates that despite the geopolitical uncertainty and fear of a #globalgrowth slowdown, the Indian #economy has shown resilience. In fact, the 2QFY23 GDP growth print remains next only to Saudi Arabia. pic.twitter.com/tJAqrCO84a

— International Journal of Banking Economics&Finance (@journal_banking) December 6, 2022

Gross value-added, which is what is left after taxes and subsidies are taken out, is expected to grow by 6.7%. The output of manufacturing is expected to go up 1.6%, the output of mining is expected to go up 2.4%, and the output of agriculture is expected to go up 3.5%.

Gross fixed capital formation, which is a proxy for investment, is expected to go up 11.5%, while government spending is expected to go up 3.1%. 7.68% growth in private consumption is expected.

Sunil Sinha, an economist at India Ratings and Research Pvt., a local branch of Fitch Ratings Ltd., said that a healthy growth in gross fixed capital formation shows that the government is still putting a lot of effort into capital spending and is giving the ongoing recovery the help it needs. But for the Indian economy to grow and get back on its feet in a sustainable way, he said, the private corporate sector capex must come back to life.