India’s gross domestic product (GDP) grew by 20.1% in the first quarter of 2021-22, as against a 24.4% contraction recorded in the same quarter a year ago, but economic activity remained well below pre-pandemic levels. COVID-19 wave.
The Gross Value Added (GVA) in the economy during the period April to June grew by 18.8% from a decline of 22.2% in the first quarter of 2020-21, according to the National Statistical Office (NSO). GVA from agriculture, forestry and fishing, the only sector to grow amid last year’s national lockdown, accelerated to 4.5% in Q1 this year from 3.5% in Q1 2020-21.
Total GVA in Q1 was still 7.8% lower than Q1 of 2019-20 at ₹30,47,516 crore, while GDP remained down by 9.2%, indicating that the economy still has some way to go before it that they return to the previously prevailing activity levels. to pandemic.
Electricity, gas, water supply and other utility services, whose GVA grew by 14.3% in the first quarter of 2021-22, compared to a decline of 9.9% last year, was the only sector, with agriculture, forestry and fisheries, the only sector in the East-East. was for further recovery. Epidemic level of 2019-20.
The government said the NSO numbers “confirmed” its prediction of an “imminent V-shaped recovery” made this time last year, adding that the GDP growth of 20.1% was “in line with the sharp second wave in the months of April-May”. In spite of ‘. Continuous economic improvement.
However, economists as well as the NSO cautioned about the record quarterly growth reading too much in print.
“The spectacular headline number cannot be interpreted as a V-shaped recovery. The fact that the economy is yet to reach the level of 2019-20, which was seen as a disastrous year for growth, is not good news,” said Professor Alok Sheel, RBI Chair of Macroeconomics at ICRIER He said that the GDP of the first quarter is less than the first quarter of 2018-19.
“This time the share of consumption in GDP was lower, indicating that the second wave and the lockdown affected households more than the first wave,” said Madan Sabnavis, chief economist, CARE Ratings.
ICRA Chief Economist Aditi Nair said the low premise of last year’s stringent nationwide lockdown had hidden the impact of the second wave of COVID-19 on the economy and the sharp year-on-year expansion in Q1 is analytically misleading, as This marks a sequential slowdown of 16.9% in the last quarter of 2020-21.
As a caveat to the interpretation of GDP projections, the NSO pointed out, “In some cases, the growth rate in 2021-22 is too high because of the low base.”
Construction and manufacturing GVA registered a growth of 68.3% and 49.6% between April and June this year, compared to a contraction of 49.5% and 36%, respectively, last year.
The GVA of trade, hotels, transport, communication and broadcasting related services registered a jump of 34.3% after a decline of 48.1% in the same quarter last year. However, this employment- and contact-intensive services sector was still down 30.2% from 2019-20 levels, suggesting a contraction of ₹2.1 lakh crore, said DK Srivastava, chief policy advisor, EY India.
“The main disappointment comes from the contribution of the government sector from both the demand and production sides,” he said, adding that the government’s final consumption expenditure (GFCE) decreased by 4.8% in Q1 this year – the only demand to show that section is. Fall.
On the production front, public administration, defense and other services such as education, health and entertainment grew by 5.8% but remained below pre-pandemic levels by 5%.
“This is a clear indication that the government has been very cautious in increasing its spending to contain the fiscal deficit,” said M. Govinda Rao, chief economic advisor, Brickwork Ratings.
“Manufacturing and construction were the key drivers of GVA growth in Q1, while on the expenditure side, private consumption and investment drove the change in GDP performance,” Ms Nair said.
Chief Economic Adviser Krishnamurthy Subramaniam said the growth rate for the full year is likely to be around the ‘ballpark’ of 11% as per Economic Survey estimates. India is poised for strong growth, driven by structural reforms, the government’s push for capital expenditure to enable private investment and a rapid COVID-19 vaccination campaign, he said.
However, economists were concerned about a decline in public capital and revenue spending in July, indicated data released separately by the Controller General of Accounts. “Despite lifting state-wise restrictions, revenue and capital expenditure declined by 23% and 28%, respectively, in July 2021,” Ms Nair said.
The Reserve Bank of India and the International Monetary Fund had revised their growth projections for the year to 9.5%. CARE Ratings revised its GDP growth forecast for the year from 9.2% to 9.1% after Tuesday’s data, as it expects growth to slow progressively over the next three quarters and the base effect will be less .
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