India’s gross domestic product (GDP) grew 8.4% in the July-September quarter, as against a 7.4% contraction a year ago, with the economy’s gross value added (GVA) growing at 8.5%, the National Statistics Office said on Tuesday.
Krishnamurthy Subramaniam, Chief Economic Adviser (CEA) of the Ministry of Finance, taking into account the GDP growth of 20.1% in the first quarter, it has registered a growth of 13.7% in the first half of this year and for 2021-22 in India as a whole. It is likely to register double digit growth. Said, an attempt is being made to emphasize that the recovery process is on.
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However, economists were not entirely sure of the extent and permanence of this reform and reacted with caution.
Although absolute GDP in the second quarter (Q2) was 0.3% higher than pre-pandemic levels, there were several worrying areas, especially private consumption spending which was still below pre-COVID levels and Simultaneously there was activity in employment-intensive sectors. such as construction and contact-intensive sectors such as retail and hotels.
Most independent economists say the base effect of negative growth last year also helped push GDP numbers down, although the CEA said the base effect in itself does not make the recovery ‘less remarkable’.
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CRISIL Chief Economist Dharmakirti Joshi said large-scale government investment continues to be a key driver of growth, while private consumption is yet to make a decisive recovery.
“On the domestic demand side, only gross fixed capital formation (GFCF) at 2019-20 levels emerged positive in Q2,” said DK Srivastava, chief policy advisor, EY India.
“Private final consumption expenditure (PFCE), in terms of its magnitude, was still low,” he said.
CARE Ratings economists Madan Sabnavis and Kavita Chacko said, “Even though the recovery momentum continues over the next two quarters, India’s GDP for the year is expected to be marginally higher than 2019-20 (around 2%). ” It maintained its GDP growth forecast for the year at 9.1%, it said in a note.
“We are yet to see a meaningful and sustainable pick-up in demand and investment. Improvements in these are expected to be limited and gradual, as even before the pandemic, the domestic economy was grappling with a low demand and low investment environment,” he said, adding that fresh domestic and external challenges and uncertainties rise, including inflation and new Versions included. of COVID virus.
Among the key sectors, agriculture, forestry and fisheries were one of the sectors doing the heavy lifting for growth, with GVA growing at 4.5% in Q2, from the same level in the previous quarter and 3% recorded in Q2 of 2020-21. was stronger.
Public administration, defense and other services recorded the highest GVA growth of 17.4% across various sectors of the economy, followed by mining and quarrying with a growth of 15.4% and electricity, gas, water supply and other utility services with a growth of 8.9% .
Manufacturing GVA grew marginally at 5.5%, compared to a 1.5% contraction in the second quarter of last year. The manufacturing sector’s value-added grew by 49.6% in the first quarter of this year, as against a 36% decline in the first quarter of the COVID-hit last year.
The employment-intensive sectors – construction and trade, hotels, transport, communication and broadcasting-related services – posted GVA growth of 7.5% and 8.2%, respectively, compared to negative growth rates of 7.2% and 16% in the previous quarter. Year.
While the growth prints were higher than expected for Aditi Nair, chief economist at ICRA, she said the divergent data does not give meaningful indications of a sustainable recovery, especially with private final consumption expenditure at pre-COVID levels. The mark continues.
“Growth of manufacturing, construction and trading, hotels etc outperformed our forecasts, suggesting rising input costs slightly lower corporate margins, and contact-intensive services continued to lag pre-COVID levels ,” He said.
GVA from the financial, real estate and professional services sectors grew 7.8% in Q2 from a 9.1% contraction last year and a modest 3.7% growth in the first quarter of this year, but still remained below 2019-20 pre-pandemic levels.
Mr Srivastava termed the increase in investment as a positive sign, but noted that demand for private consumption will pick up as jobs and incomes rise in the small and medium sectors, which in turn is linked to a recovery in the services sectors, especially business. and hotels.
Economists at CARE Ratings pointed out that a high difference of over 9% between nominal and real GDP indicates rising inflationary pressures.
Mr. Srivastava termed the increase in investment as a positive sign, but noted that demand for private consumption will pick up as employment and income rise in the small and medium sectors, which, in turn, is linked to a recovery in the service sectors, especially business. and hotels.
Economists at CARE Ratings pointed out that a high difference of over 9% between nominal and real GDP indicates rising inflationary pressures.
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