India’s FY21 Growth Revised to -7.3%

India’s gross domestic product (GDP) grew 1.6 per cent in the fourth quarter of 2021, marking two quarters of consecutive growth after it exited a rare recession. The Q4FY21 GDP data released by the National Statistics Office (NSO) is in line with estimates released b

BY Realty Plus
Published - Wednesday, 02 Jun, 2021

India’s gross domestic product (GDP) grew 1.6 per cent in the fourth quarter of 2021, marking two quarters of consecutive growth after it exited a rare recession. The Q4FY21 GDP data released by the National Statistics Office (NSO) is in line with estimates released by multiple ratings agencies earlier. In the corresponding period of 2019-20, the GDP growth was 3.1 per cent. The improvement in March quarter GDP suggests that the country’s economy recovered rapidly after registering negative growth for the first two quarters of FY21. Indian economy started recovering quickly from the third quarter of FY21 (December quarter) as restrictions were eased; the festive sales also contributed to the 0.4 per cent growth in the third quarter of FY21 after contracting 23.9 per cent in the first quarter and 7.5 per cent in the second quarter. The economy continued to improve further during the January-March quarter with key indicators bouncing back, including GST collections, employment and demand. The government has also released provisional full-year GDP data for FY21. The full-year GDP growth has been revised to -7.3 per cent, which is an improvement over the 8 per cent contraction expected earlier. In comparison, the 2019-20 GDP was 4 per cent. However, many economists say that the March quarter GDP numbers will have little implication on the current economic growth trajectory as the second wave has disrupted recovery momentum again. Rajani Sinha, Chief Economist & National Director – Research, Knight Frank India said, “Before we got hit by the second wave of COVID 19, Indian Economy had been moving back to normalcy supported by strong pent-up demand and that’s getting reflected in the improvement in Q4 FY21 GVA data. There has been a healthy rebound in manufacturing and construction sector, though the YOY growth has also been supported by the low base of last year. The sharp discrepancy in the GDP and GVA growth number is mainly due to large one-time subsidy adjustment and is on expected lines. The second wave of Covid 19 has had less adverse impact on the economy as the lockdown has been less stringent, localized and many businesses have adapted to the pandemic/lockdown. Having said that the second wave of the pandemic has been more fatal and scarring for the households, and this will be reflected in their spending pattern. Moreover, the unorganized sector and MSME’s that are large contributors to the Indian economy, will find it extremely difficult to sustain two waves of the pandemic and the demand destruction in the last one and half years. India’s growth trajectory in the next few quarters will be strongly linked to the pace of vaccination and the time taken to control the pandemic. this would have direct bearing on business and consumer sentiments, which in turn will influence the consumption and investment scenario.” Pankaj Bhansali, COO, Eqaro Surety Pvt Ltd stated, “The growth rate for the Jan-March quarter stood at 1.6%, it is a lot better than most expectations. The support mainly came from agriculture and manufacturing, construction, utilities segment. As expected trade, hotel and transport component of the economy delivered a major hit to the growth rate as it faced the most stringent lockdown. The full year FY21 GDP is a positive surprise as it contracted by 7.3% vs the CSO's estimate of -8%. Statistically it is the first yearly economic contraction in nearly 40 years but on ground situation has improved a lot and the data could have been lot worse had it not been the progressive unlocking undertaken by the respective state governments. The better than expected data will provide relief to the central bank as it announces its credit policy later this week. Moving forward the situation is expected to improve with few states relaxing curbs. A prediction of a normal monsoon year by IMD will keep inflation in check. The upcoming festive season will provide a pickup in demand. The consistent high number of vaccination and number of cases coming down is a sentiment booster. Broadly the economic growth rate will see an uptick from Q2FY22 onwards”.