GDP Rises 20 Per Cent In Q1 Of FY22

By BW CFO World Online Bureau

In the first quarter of FY22, GDP grew 20 per cent but still it is below than the increase in FY20 levels that was the pre-pandemic economy

India’s GDP grew 20.1 per cent in the June quarter, giving the illusion of an economic recovery, while it was largely driven by a deeply contracted base (-24.4 per cent). Real GDP still trailed in the pre-pandemic period by 9.2 per cent as the upcoming of covid infections impacted the economy’s gradual return to normality.

Manufacturing, construction, electricity and mining were growing fast in June quarter to cancel out the steep decline in the previous years, while key sectors could not even reverse the damage completely. Private consumption, the biggest constituent of the economy remained 12 per cent below the pre-pandemic level.

Fixed Investments rose by 55.3 per cent in Q1FY22 to raise its share in GDP by over 7 per cent. The absolute size of the fixed investments was still below the pre-pandemic level.

Data gathered by media source indicates that in 15 countries the Capex was up by 135 per cent for the quarter. The centre’s budgetary capital expenditure was up by 26.3 per cent.

Government consumption, the usual savior in times of crisis, was sluggish during the quarter- it declined by 4.8 per cent on a strong base (12.7 per cent).

With the ebbing of the second covid wave, manufacturing activities have retained their place in the quarter but the dominant services sector is still in the contraction zone. While the resilience of the agriculture sector is expected to help rural demand, urban consumption requires sustained growth in manufacturing and atleast non-contact intensive services.

Aditi Nayar, chief economist at ICRA, reportedly said that while the base effect has concealed the impact of the second Covid wave, “the sharp year-on-year expansion in Q1FY22 is analytically misleading, with a sequential slowdown of 16.9 per cent over Q4FY21 and a shortfall of 9.2 per cent relative to the pre-Covid level of Q1FY20”

Upasna Bhardwaj, senior economist at Kotak Mahindra Bank, told media sources, “Economic activity has been reviving since July and has picked up momentum. As vaccination pace picks up we expect the momentum to pickup further, although we remain wary on the evolution of delta variant cases”.