India's GDP quarterly is actual at 20.1% due to base effect

Mumbai, Aug 31 India's Gross Domestic Product (GDP) for the April-June quarter (Q1) of the ongoing financial year 2021-22 (FY22) expanded 20.1 per cent

YoY, as per data released by the government said on Tuesday evening.

The sharp rise in Q1 GDP data can be attributed to a low base last year. In the April-June quarter of 2020, the economy contracted 24.4 per cent due to the Covid-19 lockdowns. The economy grew by 1.6 per cent for Q4 of FY21 after showing contraction for the first two quarters and turning slightly positive in Q3.

In line with our expectation, the YoY GDP growth soared to 20.1 per cent in Q1 FY2022 (ICRA exp: 20.0 per cent), with the low base of last year's stringent nationwide lockdown concealing the impact of the second wave of Covid-19. However, the sharp YoY expansion in Q1 FY2022 is analytically misleading, with a sequential slowdown of 16.9 per cent over Q4 FY2021 and a shortfall of 9.2 per cent relative to the pre-Covid level of Q1 FY2020, says a report by ICRA.

GVA growth in Q1 FY2022 was higher than our forecast of 17.0 per cent, led by the robust rabi harvest, and modestly better than expected performance of manufacturing, mining and construction. Nevertheless, the growth in the contact-intensive portion of the economy trailed our expectation, highlighting how imperative it is for confidence to improve, either through accelerated vaccinations or otherwise, to drive a sustainable recovery in these beleaguered sectors.

"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 of these sectors remained well below their pre-covid levels in Q1 FY2022. On a sobering note, only agriculture and electricity posted a higher GVA in real terms relative to their pre-covid performance," says Aditi Nair, Chief economist,

ICRA.

While government consumption expenditure recorded a YoY contraction in Q1 FY2022, emerging as a drag on the pace of growth, it exceeded the pre-Covid level.

Net indirect taxes expanded by 47 per cent in Q1 FY2022, contributing to the higher growth of GDP relative to GVA in that quarter.

High frequency indicators point to a deepening recovery in Q2 FY2022, driven by the easing of state-wise restrictions and rising confidence on the back of widening vaccination coverage. Moreover, the sub-par rainfall (15 per cent below LPA in July-August 2021) has broadened the window for construction and mining activities.