India's gross domestic product (GDP) surged 20.1% in the April-June quarter of FY22, its best-ever fiscal-quarter numbers, according to the data released by the government's statistics office on Tuesday. “GDP at Constant (2011-12) Prices in Q1 of 2021-22 is estimated at £323.8 billion, as against £269.5 billion in Q1 of 2020-21, showing a growth of 20.1 per cent as compared to a contraction of 24.4 per cent in Q1 2020-21," the data from MoSPI stated.
This is the fastest growth since the mid-1990s when official quarterly data was available, and up sharply from 1.6% in the previous quarter and from a record contraction of 24.4% in the same quarter a year earlier. The growth in the current quarter is mainly on low-base effect. The growth marks a significant improvement from a deep slump last year helped by accelerated manufacturing in spite of a devastating second wave of Covid-19.
Furthermore, the quarterly gross value added (GVA) grew 18.8% at £304.8 billion, as against £256.6 billion in the year-ago period. “The GDP figures for the first quarter came in marginally weaker than our expectations (21.7% growth). However, 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 remain wary on the evolution of delta variant cases," said Upasna Bhardwaj, senior economist, Kotak Mahindra Bank.
“GDP growth recorded at 20.1% for Q1FY22, was largely in-line with expectations of 18-22%. However, the double-digit growth is slightly deceptive given the low base effect when the economy had contracted by 24.4% in the corresponding quarter last year. Visibility of revival in consumer demand increases with household consumption up by 19%, compared to contraction in FY21. Pick-up in construction by 68% also shows signs of green shoots. Though the general traction is still below pre-Covid levels, the severity of lockdowns is clearly lower this year compared to last year," said Naveen Kulkarni, Chief Investment Officer, Axis Securities.
Asia's third-largest economy suffered one of the biggest hits among major economies, contracting 7.3% in the full financial year 2020-2021, after a nationwide lockdown early last year. But the economy has not been as badly affected from the second wave in April-May this year due to less stringent lockdowns by state governments. In the March quarter, the Indian economy had grown 1.3% for the second time since novel coronavirus pandemic.
The Reserve Bank of India's estimate had revised down from its earlier projection of 26.2% in the first quarter to 21.4%, according to its latest Monetary Policy Committee (PC) resolution of August 6. Further, RBI also has forecast annual growth of 9.5% in the current fiscal year, although it has warned about the possibility of a third wave of the pandemic.
Meanwhile, the country's April-July fiscal deficit came at 21.3% of £150.7 billion of FY22 target. The eight core sector growth came at 9.4% in July, against (-) 7.6% in year-ago period. The production of coal, natural gas, refinery products, fertilizers, steel, cement and electricity industries increased in July 2021 over the corresponding period of last year, according to the Department for Promotion of Industry and Internal Trade data. Crude oil production, however, dropped by 3.2 per cent.
Many sectors like retail, auto sales, farm output, construction and exports have picked up since June, supporting the government's claim of a fast recovery, but some sectors such as transport, tourism and consumer spending remain weak. Unlike advanced economies, which announced massive stimulus to support consumers, Prime Minister Narendra Modi opted for raising spending on infrastructure, privatisation to bolster mid-term growth prospects, while providing free foodgrains to the poor.