India’s GDP grew at 13.5% in the April-June quarter

According to the estimates released by the National Statistical Office, India’s Gross Domestic Product (GDP) grew at 13.5% in the first quarter of 2022-23, the fastest pace in four quarters, with the Gross Value Added (GVA) in the economy growing at 12.7 per cent. % has increased. on 31 August.

The latest developments in the economy are aided by rapid growth in print, private consumption spending and capital investment, which are significantly lower than in the previous year. 16.2% GDP growth projected by RBI’s Monetary Policy Committee and was just 3.8% above pre-pandemic levels.

The second COVID-19 wave in the corresponding April-June quarter of the previous year recorded a 20.1% increase in GVA and an 18.1% increase in GVA due to the base effects of the more stringent initial COVID-19 lockdown. Economists expect the headline growth rate to moderate in the current quarter as the base effect wears off and uncertainty remains around global growth and domestic inflation.

GVA from agriculture, forestry and fishing, the only sectors that continued to grow through the pandemic, grew 4.5% in the April-June quarter of this year, while manufacturing and mining grew by 4.8% and 6.5%, respectively.

While the share of government final consumption expenditure in GDP declined to 11.2% between April and June this year from 12.6% last year, GDP growth was fueled by private final consumption expenditure, which is expected to hit the first half of 2021. The quarter accounted for 59.9% of GDP, which stood at 54%- 22 and Gross Fixed Capital Formation (GFCF) which reflects capital investment in the economy. The share of GFCF rose to 34.7% of GDP in Q1 this year from 32.8% in 2021-22.

The Finance Ministry said GFCF and private consumption spending in the first quarter were at their highest level in the last 10 years, aided by several reforms and steps taken by the government to rejuvenate capital investment and boost consumption .

With a sharp increase in imports in the first quarter, their share of GDP increased to 31% from 25.7% a year ago, while the share of exports increased to 22.9% from 22.7% in the first quarter of 2021-22. The finance ministry noted that this was the highest share for exports in the first quarter of any year since 2014-15 “despite supply chain disruptions and sluggish global demand”.

“With relatively high growth and low inflation, India has faced a low trade-off between growth and inflation among major peer economies… Strong performance of high frequency indicators in July and August 2022 indicates sustained growth in Q2 Gives. 2022-23,” said the Department of Economic Affairs in the ministry.

“Compared to the pre-COVID-19 GDP level of ₹35.5 lakh crore in the first quarter of 2019-20, the real GDP growth is only 3.8%. This suggests that the Indian economy has now fully recovered from the COVID shock, more time and policy support will be required to restore normal growth of 6.5 to 7%,” said DK Srivastava, Chief Policy Advisor, EY India .

Public administration, defense and other services including education, health, entertainment and other personal services recorded the fastest GVA growth at 26.3%, followed by trade, hotels, transport, communications and broadcasting-related services at 25.7% .

However, relative to pre-COVID-19 levels, contact-intensive sectors such as business, hotels, transport, stood out as the only sub-sector to report contraction in Q1, in line with a “strong but incomplete recovery”. stood by, noted ICRA chief economist Aditi Nair.

“GDP in the first quarter has registered a growth of 3.8% as compared to the pre-pandemic period of Q1 2019-20 and is below our expectations. CARE Ratings Chief Economist Rajni Sinha said the recovery in consumption demand so far has been uneven due to weak rural demand and sharp sequential contraction in the industrial sector.

While the base effects of the second COVID-19 wave in the first quarter of 2021-22 propelled the growth rate this year, the overall trend is a mixed bag, said Madhavi Arora, Chief Economist, Emkay Global Financial Services.

“It is largely a story of the service sector rebound which was also reflected in private consumption on the expenditure side. However, manufacturing has been disappointing,” she remarked.

Headline GDP growth will see a moderation in the coming quarters. The Reserve Bank of India (RBI) earlier this month reiterated its 7.2% GDP growth forecast for 2022-23, expected to grow at 16.2% in the first quarter, followed by 6.2% in the second quarter. The RBI expects growth to moderate to 4.1% in the October-December quarter and 4% in the January-March 2023 period.

“Assuming that RBI’s projections for the remaining three quarters have materialized, annual GDP growth using NSO’s Q1 estimates is 6.7%,” Mr Srivastava said.

“We see a secular slowdown in the growth print, as the base effect fades and the economy also slows sequentially. Even though recovery in domestic economic activity is still broad-based, the global drag in the form of increased prices, reduced corporate profitability, monetary policies curbing demand and reducing global growth prospects impacted the growth outlook. falls,” warned Ms. Arora, who expects GDP growth to be 7% in 2022-23.

Slowdown in core sector growth Ms Nayyar said a 4.5 per cent increase in July is an indication that despite a moderation in GDP growth in the second quarter, an uneven monsoon could impact agriculture and rural demand. He added that rebound spending on services and some easing in commodity prices could help propel Q2 growth to 6.5%-7%.

“Going forward, with global adversities, India’s external sector will face a challenging time. This will be important to accelerate domestic consumption and investment,” said Ms. Sinha. He said the level of capacity utilization in the industry has increased to 75% and the Center has increased its capital expenditure this year, which is good for investment.

ICRA expects the risk of a fall from the initial estimate of 12.7% GVA growth in the first quarter to 4.5% currently due to a possible decline in agricultural performance.