India GDP: Advance Estimates For FY22 Peg Growth At 9.2%
Nominal GDP, which will be used as the base for the upcoming budget, is estimated to rise by 17.6%.
The Indian economy will return to growth in the ongoing fiscal year, helped by a favourable base effect and a rebound in economic activity.
GDP is estimated to grow by 9.2% in FY22 compared to a contraction of 7.3% in FY21, according to the first advance estimates released by the Central Statistics Office, ahead of the Union Budget.
A Bloomberg poll of 23 economists estimated GDP to rise by 9.5% in FY22, similar to the Reserve Bank of India's forecast.
Gross Value Added, which strips out indirect tax and subsidies, is expected to rise by 8.6% compared to a contraction of 6.2% in FY21.
Nominal GDP, which will be used as the base for the upcoming budget, is estimated to rise by 17.6% compared to a fall of 3% in FY21. This is stronger that the 14.4% nominal GDP growth used for calculating budget estimates for FY22.
In nominal terms, the size of the Indian economy will rise to Rs 232.14 lakh crore at the end of the current fiscal from Rs 197.5 lakh crore a year ago, as per advance estimates. The economy's nominal output was at Rs 203.5 lakh crore as of March 2020, before the pandemic hit.
Per capita GDP is estimated at Rs 1.68 lakh in FY22, a rise of 16.4% from Rs 1.46 lakh in FY21 when per capita income fell.
According to data released so far, in real terms, GDP rose by 20.1% in the first quarter of the fiscal year and by 8.4% in the second quarter.
"The implicit GDP growth of 5.6% for H2 FY22 built in by the National Statistics Office may not fully factor in the admittedly evolving impact of Omicron," according to Aditi Nayar, chief economist at ICRA.
Compared to the pre-Covid performance of FY20, the advance estimates project an anemic rise of 1.3% and 1.9%, respectively, for GDP and GVA in FY22.Aditi Nayar, Chief Economist, ICRA
Private final consumption expenditure, along will the segment of trade, hotel, transport, communication will continue to trail FY20 levels by 2.9% and 8.5%, she added. "This underscores the lingering impact of Covid-19 on the Indian economy."
GDP Estimates: Key Sectoral Trends
Most key sectors are estimated to see double-digit growth aided by the base effect.
Agriculture sector is estimated to grow by 3.9% in FY22 compared to a growth of 3.6% in FY21.
The mining sector growth is likely to grow by 14.3% after a contraction of 8.5% in the previous year.
Manufacturing sector growth is estimated at 12.5% after a contraction of 7.2% in the previous year.
Electricity, Gas, Water Supply & other Utility Services are estimated to grow by 8.5% compared to a growth of 1.9% in FY21.
Construction is seen rising by 10.7% compared to a contraction of 8.6% in the preceding year.
Trade, hotel, transport, communication is estimated to rise by 11.9% compared to a contraction of 18.2% last year.
The financial services, real estate and professional services sector is likely to grow by 4% compared to a contraction of 1.5% in the previous financial year.
The public administration segment, supported by government spending, is seen at 10.7% compared to a contraction of 4.6%.
Expenditure Trends
Private consumption is likely to see a modest recovery while private investments are expected to lead.
Private final consumption expenditure, reflecting consumer spending, is seen rising by 6.9% after a contraction of 9.1% in FY21.
Growth in government final consumption expenditure is pegged at 7.6% compared to a growth of 2.9% last fiscal year.
Gross fixed capital formation, which reflects private investment, is estimated to rise by 15% after it contracted by 10.8% in the previous year.
The data also showed that the share of private consumption expenditure as a percentage of the GDP fell to 57.5% at current prices in FY22 from 58.6% last fiscal. It is also less than 60.5% in FY20.
In contrast, the share of gross fixed capital formation has risen to 29.6% in FY22 from 27.1% last fiscal. It was at 28.8% in FY20.
Omicron Concerns Ahead
Economists have started revising GDP forecasts for the full fiscal year citing rising risks from a third wave of Covid infections.
Contact intensive services are definitely going to take a hit in the ongoing quarter, Nayar said. "Our sense is that after a 6-6.5% rise in Q3 FY22, the GDP expansion is set to slip below 5% in the ongoing quarter." Madan Sabnavis, chief economist at Bank of Baroda is expecting the renewed restrictions to shave-off 10-20 basis points from GDP growth.
Citing Omicron risks, India Ratings & Research now forecasts GDP growth at 5.7% in the fourth quarter, 40 basis points lower than its previous estimate of 6.1%. For the full year, GDP growth is seen at 9.3%, 10 basis points lower than India Ratings' previous estimate.
Watch an analysis of the GDP advance estimates below: