EXPLAINED | GDP Growth Accelerates To Record 20.1% In Q1FY22. What Does It Mean For Economy?

The economic recovery is supported by rapid vaccination coverage from 4.7% of the total population in Q4 of 2020-21 to 24.5% in Q1 of 2021-22. 

(Representative Image)

New Delhi: India's gross domestic product (GDP) rebounded by growing at a record of 20.1% during the April -June quarter, led by manufacturing, reaffirming the government's foresight of a V-shaped recovery after a record 24.4% contraction in Q1 of 2020-21.

The government sees the macro-economic fundamentals much stronger after once in a century pandemic than the post-global financial crisis of 2008-09. 

In value terms, the GDP stood at Rs 32,38,020 crore in Q1 FY22, higher than Rs 26,95,421 crore in the corresponding period of FY21.

On a sequential basis, most parameters of GDP have fallen in Q1 FY22, due to the adverse impact of the second wave of the pandemic on the economy.

The Reserve Bank of India had projected Q1 real GDP to grow by 21.4%.

According to the government, the recovery is supported by rapid vaccination coverage from 4.7% of the total population in Q4 of 2020-21 to 24.5% in Q1 of 2021-22. 

"Daily vaccination crosses one crore mark in August, Over 64 crore doses are administered so far, and over 200 crore doses are expected in supply until December 2021. More than half of the adult population covered with the first dose of vaccine," said Dr. K. V. Subramanian, India's chief economic advisor.  

Exports have risen by 8.7% during the quarter, while imports are lower by 5.3% compared to pre-pandemic levels. While the services sector continues to feel the impact of the pandemic, the industry has grown by 46% to recover to 96% of pre-pandemic levels.

The Finance Ministry anticipates stronger growth for India on the back of structural reforms, the government's capex push, financial sector clean-up and, and rapid inoculation.

Sectors that witnessed double-digit growth during Q1 2021-22 included Mining and Quarrying (18.6%); Manufacturing (49.6%); Electricity, Gas, Water Supply & Other Utility Services (14.3%); Construction (68.3%); and, Trade, Hotels, Transport, Communication & Services related to Broadcasting (34.3%), government data showed. 

GVA Electricity, Gas, Water Supply, and Other Utility Services has surpassed the pre-covid levels during Q1 of FY 2020-21. 

Performance of Agriculture and allied sectors has remained consistent, registering positive growth in Q1 of both FY 2020-21 (3.5%) and FY 2021-22 (4.5%). 

India Inc believed the number reflects that the economy being hit by the pandemic has bounced back.

"The GDP growth for Q1 22 at 20.10 % is well in line with the estimates, and it gives comfort that the economic revival process is intact. But the recovery is not that strong because the contraction was deeper," said  Dr. Joseph Thomas, Head of Research - Emkay Wealth Management.

"The sharp growth in Q1 GDP is mainly because of the very low base of last year when the economy was under a national lockdown. However, the adverse impact of the second wave of the pandemic on Q1 FY22 GDP is relatively muted compared to the impact of the first wave, and other high-frequency economic indicators also reflect this. The comforting factor is that the investment to GDP ratio has remained above 30% as against a low of 24% touched in Q1 FY21," said Ms Rajani Sinha, Chief Economist and National Director - Research, Knight Frank India.

At this juncture, there is a need to further fuel the drivers of household consumption and private investments to enhance the aggregate demand in the economy as it will have an accelerated effect on the expansion of capital investments in the country, said Sanjay Aggarwal, President, PHD Chamber of Commerce and Industry.