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Rating agency ICRA has projected the year-on-year (YoY) growth of the Gross domestic product (GDP) and gross value added (GVA) at basic prices (at constant 2011-12 prices) in the second quarter of the current fiscal (Q2FY23) at 6.5% and 6.3%, respectively, a base effect-led halving from the 13.5% and 12.7%, respectively recorded in Q1 FY2023. However, it said the growth in the GDP over the pre-Covid levels is expected to double to around 8% in Q2 FY23 relative to the 3.8% seen in the previous quarter, with a widening of the economic recovery.

ICRA estimates the sectoral growth in Q2 FY23 to be driven by the services sector (+9.4%), with a subdued trend foreseen for the industry (+2.0%), and agriculture, forestry and fishing (+2.5%). Travel-related services have recorded a healthy recovery since the onset of FY2023, benefitting from pent-up demand related to corporate travel and increasing confidence for availing leisure services amid the decline in trajectory of Covid-19 infections. As many as nine of the 16 service sector high frequency indicators reported a double-digit YoY expansion in Q2 FY23.

In particular, the combined revenue expenditure (revex) of the 24 state governments for which data is available, posted a considerable YoY growth of 16.7% in Q2 FY23. In addition, other services, which include education, healthcare, recreation, and other personal services, are likely to have seen a sustained demand in this quarter. However, the government’s non-interest revenue expenditure contracted by 1.4% in Q2 FY23. Overall, ICRA projects the GVA growth of the services sector at a robust 9.4% in Q2 FY23.