India GDP Grew 8.4% In July-September As Lockdowns Eased
The Indian economy strengthened in the July-September 2021 quarter, helped by a low base, a pickup in the pace of vaccinations and easing of localised restrictions.
GDP grew 8.4% in the second quarter of the fiscal year over a year ago, compared with 20.1% in the first quarter, according to data published by the National Statistical Office. GVA growth during the quarter was at 8.5% compared to 18.8% in the previous quarter.
Growth came in marginally higher than 8.1% forecast by a Bloomberg poll of economists. The Indian economy contracted in the first and second quarter of the previous financial year. In the second quarter of the last fiscal, while GDP contracted 7.4%, GVA contracted 7.3%.
Nominal GDP growth was stronger at 17.5% in Q2 due to higher wholesale price inflation, which influences the GDP deflator more than retail inflation.
Sectoral Trends (Year-On-Year)
Agriculture output grew at 4.5% in the second quarter, similar to the growth seen in the first quarter.
The mining sector grew by 15.4% in the second quarter, after expanding 18.6% in first quarter.
Manufacturing grew by 5.5% in the second quarter, compared to 49.6% last quarter.
Construction grew 7.5% in the second quarter, compared to 68.3% in the preceding quarter.
Trade, hotel, transport, communication grew 8.2% in the second quarter, compared to 34.3% in the previous quarter.
The financial services sector grew at 7.8%, compared to 3.7% in the previous quarter.
"Heartening numbers came from the industrial sector which grew 6.9% in the second quarter," said Sunil Sinha, principal economist at India Ratings & Research. "In level terms, barring construction, all the industry segments are now higher when compared with the pre-Covid levels."
Private consumption, reflected in private final consumption expenditure, rose 8.6% year-on-year in the second quarter compared to 19.3% in first quarter.
Investments, as reflected by gross fixed capital formation, rose 11% in the second quarter compared to 55.3% in the first quarter.
Government final consumption expenditure rose 8.7% in the second quarter, compared to a contraction of 4.8% in first quarter.
On the demand side, investments (largely government) continued to remain the key growth driver while private consumption is yet to show a decisive recovery. Also, unlike last year, net exports are again a drag on the economy.DK Joshi, Chief Economist, CRISIL
Reading Into The Data
While the absolute real level of GDP is now mildly above the pre-Covid level of second quarter of FY20, the disaggregated data is far from convincing, Aditi Nayar, chief economist at ICRA, said. Nayar points to the fact that private final consumption expenditure continues to trail the pre-Covid levels. However, the 1.5% rise in gross fixed capital formation in the second quarter relative to pre-pandemic levels is a silver lining, she said.
The sectoral data also throws up mixed trends. While growth in agriculture and the public administration segments was stronger, GVA excluding those two sectors recorded a modest growth of 7.5%.
Higher growth in the "valuables" category also contributed to the quarterly GDP growth. For the purpose of GDP computations, the government's statistical office defines valuables as assets acquired as stores of value. These could include jewellery or precious metals.
"A large part of the growth upside was driven by the public administration, education, health segment which saw sharp increase in momentum as well as a favorable base effect," said Suvodeep Rakshit, senior economist at Kotak Institutional Equities. In the third quarter, growth should remain fairly well supported on account of the festive season and opening up of services sector, he said. "Growth remains well on track for a full year growth of around 9.5%."
Watch GDP Fineprint with Crisil's Dharmakirti Joshi and Barclays' Rahul Bajoria here: