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Perspective on Q1FY23 GDP data by Mr. Nikhil Gupta, Chief Economist, Motilal Oswal Financial Services Ltd

** Real GVA came at 12.7% YoY in 1QFY23, close to our forecast of 12.5%, but much lower than Bloomberg consensus of 14%. Real GDP growth came in at 13.5%, higher than our forecast but lower than the consensus of 15.3%.

** Details suggest that while industrial activity was lower than expected, better services sector growth pushed overall GVA growth higher.

** From GDP perspective, private consumption grew much faster than expected, while govt consumption growth was lower and investments were only slightly higher.

** Notably, RBI expected 16% growth in 1Q, with 6.2/4.1/4% growth in the subsequent quarters. Assuming no change in 2Q-4Q projections, today's 1Q data suggests that RBI's FY23 growth forecast will be revised down to 6.7% from 7.2% earlier. *We, on the other hand, have revised our forecast to ~6.5%, up from 6.3% earlier.

** Overall, it confirms that growth recovery is not so strong in India. It ideally implies that monetary tightening should be not very aggressive. However, it appears that the terminal repo rate will be 5.75-6% in this cycle with 1-2 more rate hikes, ending the cycle in Dec'22.

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