India’s gross domestic product (GDP) for the first quarter of 2021-22 grew at 20.1% compared to a contraction of 24.4% in the same period a year ago. India’s GDP is estimated to be at Rs 32.38 lakh crore compared to Rs 26.95 lakh in the same period on a year-on-year (YoY) basis. Gross value added (GVA) for the same quarter is estimated at Rs 30.48 lakh crore, as against Rs 25.66 lakh crore in the first quarter of 2020-21, showing a growth of 18.8%.
“Although the healthy GDP growth numbers are mainly due to the base effect, yet it indicates that, despite COVID 2.0, the economic activities remained alive as the local and regional restriction imposed were not as stringent as they were during the Covid 1.0,” India Ratings and Research (Ind-Ra) said in a note.
The jump in growth was aided by the low base of last year, when a nationwide lockdown had stagnated economic activity.
”However, to put things in perspective the level of GDP in Q1 FY22 is still 9.2% lower than the level attained in the Q1 FY20. This indicates that some of the grounds that the Indian economy had recovered by clocking a positive quarterly GDP growth of 0.5% in Q3 FY21 and 1.6% in Q4 FY21 was lost to the second wave of COVID,” Ind-Ra said.
Agriculture, forestry, and fishing recorded an increase in growth to 4.5% in the first quarter of 2021-22 compared to a growth of 3.5% in the same period a year ago. Mining and quarrying in this quarter recorded a 18.6% growth compared to a 17.2% contraction a year ago. Manufacturing recorded a 49.6% growth compared to a contraction of 36% a year ago. Trade, hotels, transport, communication and services related to broadcasting grew by 34.3% compared to a contraction of 48.1% in the first quarter of 2020-21.
“Manufacturing and construction were the key drivers of the pickup in GVA growth in Q1 FY2022, whereas on the expenditure side, private consumption and investment powered the YoY turnaround in the GDP performance. Nevertheless, all these sectors remained well below their pre-Covid levels in Q1 FY22. On a sobering note, only agriculture and electricity posted a higher GVA in real terms relative to their pre-Covid performance,” Aditi Nayar, chief economist ICRA, said.
Private final consumption expenditure grew 55.1% in the first quarter of 2021-22 compared to a growth of 55.4% a in the same period a year ago. Government final consumption expenditure grew 13%, falling from a growth of 16.4% in the same period a year ago. Gross fixed capital formation recorded a 31.6% growth, increasing from 24.4% in the first quarter of last year.
“With Q1 FY22 GDP growth printing slightly lower than the MPC's own forecasts, we continue to expect status quo until strengthening domestic demand becomes the key driver of inflationary pressures. In our view, policy normalisation will commence in February 2022, with a change in the stance of monetary policy to neutral from accommodative,” Nayar said.