June quarter's household consumption, capital investment rise, shows data

Government consumption falls in April-June quarter; inflation and supply chain disruption impacts corporate balance sheets

In spite of inflationary pressures due to the war in Europe, India’s household consumption and capital investment recovered strongly in the April-June quarter (Q1FY23), official data showed. Government consumption, however, fell as a percentage of GDP.

Household and private sector consumption, as measured by Private Final Consumption Expenditure (PFCE), came in at Rs 39.7 trillion in nominal terms in Q1FY23, compared with Rs 28.4 trillion for the same period last year, and Rs 39.2 trillion in Q4FY22 (January-March).

As a percentage of nominal GDP, PFCE was 61.1 percent compared with 55.5 percent in Q1FY22 and 59.2 percent in Q4FY22.

Nominal Gross Fixed Capital Formation (GFCF), a proxy for investment, came in at Rs 19 trillion in Q1FY23, compared with Rs 14.4 trillion in Q1FY22. GFCF was slightly lower than Rs 20.2 trillion in Q4FY22.

This shows that while the government’s capex push has started crowding in private sector investment as well, investment was perhaps affected by inflation and supply chain disruption impacting corporate balance sheets.

As percentage contributor to nominal GDP, GFCF was 29.2 percent in Q1FY23, 28.2 percent in Q1FY22 and 30.5 percent in Q4FY22

Nominal Government Final Consumption Expenditure (GFCE) was Rs 7.3 trillion in Q1FY23 (11.3 percent of nominal GDP), compared with Rs 6.6 trillion (12.9 percent) in Q1FY22 and Rs 7.9 trillion (11.9 percent) in Q4FY22.