Economy is expected to grow between 5.7 and 6.2 per cent in three months period ended December 31, 2021 (Q3 of Fiscal Year 2021-22 or FY22). The government will make the growth number for the said period along with second advance estimate for entire current fiscal on Monday.

Government officials acknowledge that third wave of pandemic did have some impact, but it was not significant. They highlighted what the Monthly Economic Report of Economic Affairs Department has mentioned and it was that “the impact of the third wave on economic activity appears to be much less, even compared to the muted impact of the second wave.”

Rise in GST collections

Another positive factor they highlighted is the increase in GST collection, which was between ₹1.29 -1.38 lakh lakh crore during the period. Since, this tax is levied at the consumption level, higher collection shows improvement in demand and consumption. They expect growth to be better.

However, various research agencies do not share such optimism. Economic Research Department of the State Bank of India forecast that the GDP growth for Q3 FY22 would be 5.8 per cent, with a downward bias. “Interestingly, GVA (Gross Value Added) will be higher than GDP (Gross Domestic Products) because of a distorted base,” it said in a report authored by its chief economist Soumya Kanti Ghosh.

Meanwhile, another research agency, ICRA expects the year-on-year (YoY) growth of the GDP and GVA Q3 to display a broad-based, base effect-led moderation to 6.2 per cent and 6.0 per cent respectively, from the performance in Q2 (8.4 per cent and 8.5 per cent, respectively). It projects the GVA growth in services, industry, and agriculture, forestry and fishing at 8.2, 4.2 and 2.5 per cent, respectively, in third quarter as against 10.2, 6.9 and 4.5 per cent in second quarter..

“The economic recovery gained some traction in Q3 FY2022. Rising vaccine coverage and confidence levels instigated a cautious revival in the contact-intensive sectors. Additionally, robust merchandise and service sector exports supported economic activity in Q3 FY2022. While the YoY performance of manufacturing volumes was surprisingly feeble, price hikes protected margins in some sectors in that quarter,” Aditi Nayar, Chief Economist with ICRA said.

Forecast

RBI has given a projection of 6.6 per cent for third quarter. For the full year, it expects growth to be 9.5 per cent while Central Statistical Organisation (CSO) has given growth number of 9.2 per cent in the first estimate.

However, SBI’s research report has lowered its estimate for full year to 8.8 per cent from 9.3 per cent. For this, it factored the fatigue accruing on account of continued fight against the virus and the spill over of ripple effects intermingling in somewhat indecipherable ways. “With this, the real GDP will be around ₹ 235 lakh crore against the pre-pandemic FY20 real GDP of ₹145.69 lakh crore. The good thing though is a part of this growth will be frontloaded into FY23 with SBI GDP forecast at 8 per cent+, higher than RBI and Government estimates at 7.8 per cent or so.” Ghosh mentioned.

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