India Q1 FY22 GDP Grew 20.1%; GVA 18.8% On Low Base
The economy grew at a record pace in the April-June 2021 quarter, but contracted compared to the preceding quarter.
The economy grew at a record pace in the April-June 2021 quarter, compared to the same quarter last year, when India was in the midst of a nationwide lockdown. But, it contracted compared to the preceding quarter as the pace of recovery was dented by the localised lockdowns imposed to curb the second wave of covid-19.
GDP in Q1 FY22 rose by 20.1%, compared to 1.6% year-on-year in Q4 FY21, according to data published by the national statistical office on Tuesday. GVA growth in Q1 FY22 was at 18.8% compared to 3.7% in Q4 FY21 on an annual basis.
A Bloomberg poll of 45 economists had estimated first quarter GDP growth at 21% and GVA at 19.6%.
Sequential Contraction
Nominal GDP, measured at current prices, in Q1 FY22 is estimated at Rs 51.2 lakh crore, as against Rs 56.8 lakh crore in Q4 FY21 and Rs 50 lakh crore in Q1 FY20 before the pandemic.
GVA at current prices in Q1 FY22 is estimated at Rs 46.2 lakh crore, as against Rs 51.2 lakh crore in the previous quarter and Rs 45.8 lakh crore in Q1 FY20.
In real, inflation adjusted terms, the level of GDP remained below pre-pandemic levels, said Aditi Nayar, chief economist at ICRA.
In line with our expectation, the year-on-year GDP growth soared to 20.1% in Q1 FY2022, with the low base of last year's stringent nationwide lockdown concealing the impact of the second wave of Covid-19. However, the sharp year-on-year expansion in Q1 FY2022 is analytically misleading, with a sequential slowdown of 16.9% over Q4 FY2021 and a shortfall of 9.2% relative to the pre-Covid level of Q1 FY2020.Aditi Nayar, Chief Economist, ICRA
Radhika Rao, economist at DBS Bank, also said the impact of the second covid wave is better reflected in the sequential contraction.
Agricultural output proved to be resilient. This, alongside better construction and manufacturing activity owing to less stringent localised restrictions compared to the first Covid wave, helped the economy, said Rao. Expectedly, contact-intensive services were weak. "Notwithstanding upbeat exports, net trade emerged as a drag on the headline growth," she added.
The sequential drop was less than expected, said Suman Chowdhury, chief analytical officer at Acuité Ratings & Research.
The onslaught of the second Covid wave during Q1 FY22 lead GDP growth to contract sequentially by 16.9% over the January-March’21 quarter, after expanding for three consecutive quarters. Notably, the decline in the sequential print has been nearly half of what was seen in Q1 FY21.Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research
Year-On-Year Expenditure Trends
Private consumption, reflected in private final consumption expenditure, rose 19.3% in first quarter on an annual basis, compared to 2.7% in the fourth quarter last financial year.
Investments, as reflected by gross fixed capital formation, rose 55.3% in first quarter y-o-y, compared to 10.9% previous quarter.
Government final consumption expenditure contracted 4.8% in first quarter, compared to a rise of 28.3% in the fourth quarter.
Year-On-Year Sectoral Trends
Agriculture output grew at 4.5% in the first quarter on an annual basis, compared to 3.1% in the fourth quarter of the last financial year.
The mining sector grew by 18.6% in first quarter, compared to a contraction of 5.7% in the previous quarter.
Manufacturing grew by 49.6% on an annual basis, compared to 6.9% last quarter.
Construction grew 68.3% in the first quarter, compared to 14.5% in the preceding quarter.
Trade, hotel, transport, communication grew 34.3% in the first quarter, compared to a contraction of 2.3% in the previous quarter.
The financial services sector grew at 3.7%, compared to 5.4% in the previous quarter on an annual basis.
Recovery Underway
Multiple high frequency indicators show that the economy has continued to gather steam post the second covid wave. Mobility heavy indicators have rebounded to pre-pandemic levels.
A weekly activity gauge by DBS Bank indicates that the economy maintained steam into July-August, benefiting from a moderate case count and expectations of a shallow third wave, if any, Rao said.
Upasna Bhardwaj, senior economist at Kotak Mahindra Bank, said that while the GDP figures for the first quarter came in marginally weaker than expectations, economic activity has been reviving since July and has picked up momentum. "As vaccination pace picks up we expect the momentum to pick up further, although we remain wary on the evolution of delta variant cases," she said.
Economic recovery is gathering momentum and growth for FY22 should be around the budget aim of 10.5-11%, chief economic adviser, KV Subramanian said in a briefing post the release.