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The Indian economy appears to be gathering momentum, with three key indicators — GDP growth rate for the July-September quarter, core sector performance in October and fiscal deficit for the April-October period — exceeding expectations.
The GDP growth rate for the second quarter reached 8.4 per cent, core sector growth touched 7.5 per cent and the fiscal deficit for seven months came in at 36.3 per cent.
Chief Economic Advisor KV Subramanian said he expects the growth rate for the full fiscal year to be in double digit, higher than the RBI projection of 8.5-9.5 per cent.
“India is likely to touch double-digit growth in FY21-22, 6.5-7 per cent the next year and over 7 per cent thereafter,” Subramanian said in his last press conference as the CEA.
He said the impact of second generation reforms would also unfold in the coming months. The hope, he said, is that the impact of the new Covid variant Omicron would be cushioned by the rapid pace of vaccination and strict adherence to protocols.
Looking forward, he said, the informal sector has been impacted but there is low likelihood of hysteresis (simply put, a lag between input and output in a system upon a change in direction) because of high labour-intensity.
GST collections indicate economic revival
Financial sector healthier in Q2
At the same time, he said, the financial sector is healthier as net profits of Public Sector Banks at June-end reached over ₹14,000 crore, or 140 per cent and 255 per cent higher than the corresponding period of FY21 and FY20.
Also, the manufacturing sector has benefited from policy push.
Commenting on the GDP growth number, DK Srivastava, Chief Policy Advisor, EY India, said that led by a high real growth in public administration, defence services, etc at 17.4 per cent in Q2 of FY22, the real GDP growth at 8.4 per cent coming after a growth of 20.1 per cent in the previous quarter signals the feasibility of the Indian economy showing an annual growth of close to 9.5 per cent for FY22.
Senior Congress leader and former Finance Minister P Chidambaram ‘cautiously welcomed’ the GDP number. “It is not yet a V-shaped recovery. The fineprint will bear that out,” he said, adding that there are sectors that are still crippled and need help and time to recover.
GDP growth rate for FY22 could be in 9.3-9.6% range: SBI Ecowrap
Fiscal deficit
The Centre’s fiscal deficit reached 36.3 per cent of the Budget Estimate (BE) during the first seven months (April-October) of 2021-22. Experts say if disinvestment does not go according to plan, the annual deficit number could exceed BE by 10-20 basis points.
Aditi Nayar, Chief Economist with ICRA, estimates that the total expenditure will overshoot the FY22 BE by ₹1.3-1.5-lakh crore, based on the net outgo related to the First Supplementary Demand for Grants, the recent enhancement in the food subsidy outgo towards the PMGKAY, the increase in the fertiliser subsidy for the rabi season, and the likely enhancement in the allocation for MGNREGA and the new RoDTEP scheme for exporters.
Core sector rises in October
The output of the eight core industries grew a robust 7.5 per cent in October, official data released on Tuesday showed. This was higher than the 4.5 per cent growth in September and 0.5 per cent growth in October 2020.
India's economic growth slowed to 8.4 per cent in the second quarter of 2021-22, mainly due to waning low base effect, official data showed on Tuesday.
The GDP growth in April-June quarter this fiscal stood at 20.1 per cent. The Indian economy had contracted by 24.4 per cent in April-June last year.
The gross domestic product (GDP) had contracted by 7.4 per cent in the corresponding July-September quarter of 2020-21, according to data released by the National Statistical Office (NSO).
GDP at Constant (2011-12) Prices in April-September 2021-22 (H1 2021-22) is estimated at ₹68.11 lakh crore as against ₹59.92 lakh crore during the corresponding period of previous year, showing a growth of 13.7 per cent in H1 2021-22 as against a contraction of 15.9 per cent during the same period last year, it stated.
The government had imposed a nationwide lockdown at the onset of the COVID-19 pandemic last year.
China has recorded a growth of 4.9 per cent in the July-September period of 2021.
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