The ballooning subsidy bill of the government was a factor behind the growth in the gross domestic product (GDP) falling below the growth in Gross Value Added (GVA) in the third quarter, analysts said.

Statistics ministry data revealed GDP growth in the third quarter at 4.4 per cent which was below the GVA growth of 4.6 per cent. “Taxes less subsidies have risen a subdued 1.4 per cent in the third quarter making the GDP growth fall below the GVA rise, which has occurred after a gap of four quarters,” Aditi Nayar, chief economist, Icra, said.

“The low growth is somewhat surprising, as indirect taxes such as GST performed quite well in this quarter. However, the government’s subsidies did rise in the third quarter, led by fertiliser subsidies.

The government has fixed total subsidies on food, fertilisers and fuel at Rs 5.22-lakh crore in its revised budget estimate for 2022-23 against the actual budget estimate of Rs 4.46-lakh crore in the last fiscal. The fertilizer subsidy is estimated to increase to Rs 2.25-lakh crore this fiscal from Rs 1.54-lakh crore in 2021-22.

7% forecast

Chief Economic Advisor V. Anantha Nageswaran said India needs to grow at 5.1 per cent in the March quarter to achieve a 7 per cent real GDP growth rate for the full financial year. India, however, has to be prepared to deal with El Nino.

“Since 1950, there have been 26 global El Nino years and 15 Indian drought years. However, the association between the two climatic phenomena appears to have strengthened since the 1980s, with an even stronger co-relation in the last 20 years,” said a report by Emkay research. El Nino adversely affects India’s monsoon and eventually hurts agriculture.