GDP data points towards weak growth patches ahead

Q2 Gross Value Added (GVA) growth slowed expectedly to 5.6 percent, led by sharp contraction in the manufacturing sector. However, the GDP growth grew a tad better than our expectations at 6.3 percent, largely reflecting higher net taxes adjusted for subsidies. Government consumption declined by over 4 percent YoY, which implies that the government’s revenue expenditure slowed with the focus on capital spending. The drag from net imports continued, with imports outpacing exports due to the sustained rise in global commodity prices as well as robust domestic demand. We retain our forecast of 7 percent growth for FY23, while acknowledging the rising downside risks to the forecast. Emkay Aravi Aravi is the Lead Economist at Emkay Global Financial Services . . .