Economists, the RBI and various research outfits expect the first quarter GDP growth to be between 15-23 per cent, on the back of base effect and smart recovery of economic activity vis-a-vis the same period last fiscal.

On Tuesday, the government will release the first quarter (April-June 2021) GDP data for the current fiscal.

However, all agencies are unanimous on the fact that the base effect will have a key role as GDP de-growth was 24.4 per cent last year.

The April-June quarter saw the peak of second wave, resulting in localised lockdowns. However, lockdown in the current fiscal was much different from that of last fiscal.

First, there were no stringent nationwide lockdowns. Second, inter-State and intra-State movement was permitted. Third, manufacturing activities and services (on a limited scale) were not much affected.

The Finance Ministry has repeatedly said that the first quarter growth will be affected. In fact, in his presentation after the announcement of FY21 GDP, Chief Economic Advisor, KV Subramanian, said that the second wave peaked in May, “however localised or State-wide restrictions adopted to combat its spread present some downside risk to growth in Q1 of FY22”. He made it clear that there are reasons to expect a muted economic impact. However, he did not give any estimate.

The Finance Ministry has also made it clear that its assessment of the economy is consistent with the Reserve Bank of India. Earlier this month, the RBI’s Monetary Policy Committee (MPC) said that first quarter growth is estimated at 21.4 per cent. However, SBI, in its research report, did not go with this optimism and forecast GDP (Gross Domestic Product) growth at around 18.5 per cent, but with upward bias. It also estimated GVA (Gross Value Added) at 15 per cent. The report attributed strong tax collection for wide divergence between GVA and GDP.

Yuvika Singhal, Economist with QuantEco, said: “The hearty double-digit Q1 FY22 GDP growth, which we estimate at 23 per cent, is more of optics, led by last year’s favourable base owing to the nationwide lockdown.”

This headline growth completely conceals the sequential contraction in the quarter, owing to the ferocious second wave of the pandemic. The bulk of deceleration in economic activity occurred over April and May as pandemic restrictions turned severe across most States amid an escalation in infections. June, however, saw a sharp turnaround in activity, enabled by a swift opening up of the economy amid receding Covid cases in several States.

Agriculture growth

Giving a sectoral picture, she pegged agriculture growth rate at 3.5 per cent. On the other hand, a positive base-led broad-based recovery is anticipated in both industry and services sectors, with the latter posting its first annualised expansion since the start of the pandemic, she said while expecting GDP growth for full FY22 at 10 per cent.

Devendra Kumar Pant, Chief Economist with India Ratings & Research (Ind Ra), said that by the end of March this year, the Google mobility indicators (retail and recreation, transit and workplace) were around 15-20 per cent lower than their baseline levels. However, the regional/localised lockdown due to Covid has slowed down the economic recovery process. While economic activity have improved by June-end, it was they were still lower than the March level. “India Ratings estimates Q1 FY22 growth to be 15.3 per cent, mainly because of the base effect,” he said.

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