At 13.5% Q1 GDP growth ahead of pre-pandemic levels

The Indian economy expanded 13.5 percent in the first quarter (April-June) 2022-23, compared to 20.1 percent in the same quarter 2021, amid sprouting signs of recovery in domestic demand.

That said, matched to 2019-20, the immediate last year before the pandemic devastated the world economy, India's real or inflation-adjusted quarterly gross domestic product (GDP) grew 3.8 percent on a year-on-year basis.

Persistently high oil prices have had a sobering effect on India's national economy, with the value of imports recording a sharp jump in the quarter compared to the same period in 2021.

The provisional estimates of national income for the first quarter of 2022-23, put out by the National Statistical Office (NSO) on August 31, show that India's imports at constant (2011-12) prices during the quarter stood at Rs 1,143,736 crore from Rs 833,455 crore in the previous year, up by 37.2 percent.

There are two apparent proximate reasons for this spike in the value of imports. One, the rupee's value has considerably weakened over the last 12 months, falling from about 75-76 to a US dollar to about 80 now. This has made all imported goods — from cheese to apples to crude oil — costlier.

Two, the price of crude oil has remained stubbornly high, although it has softened since the time the Ukraine-Russia war started in February. India imports more than two-thirds of its crude oil requirements. Dearer crude has shown up in the GDP numbers too in the form of a higher overall import bill.

On a sequential basis, India's quarterly GDP growth resembles an inverted hockey stick. From a high of 20.1 percent in the first quarter (April-June 2021), aided by a low base in the previous year, the rapidity of growth had actually fallen ever since in the subsequent quarters, making for a consistent descending line growing at 8.4, 5.4, and 4.1 percent respectively, before rebounding with a 13.5 percent growth in April-June this year.

There are definite signs of a sharp turnaround in domestic demand. Private final consumption expenditure (PFCE), in constant 2011-12 prices, have grown 25.9 percent in the first quarter this year, compared to the same period in 2021.

Nearly 60 percent (59.9 percent to be precise) of India's GDP in constant prices, the value of all goods and services produced in the country, came from the PFCE. This implies that on a comparative basis households have spent more this year, both on essential and aspirational goods and services, revving up the broader economy.

`Trade, Hotels, Transport, Communication & Services related to Broadcasting' grew by a robust 25.7 percent, mirroring rise in discretionary consumer spending on services.