India's GDP: 5 things to consider for today's GDP in the first quarter of FY22

India's GDP: 5 things to consider for today's GDP in the first quarter of FY22

India's GDP: 5 things to consider for today's GDP in the first quarter of FY22

The centre is expected to release its GDP estimates for the first quarter (Q1) of 2021-2022 today. The economy is said to have posted double-digit record growth in the June quarter. However, the strong growth would be comparable to the same quarter last year from April to June 2020, when the economy contracted 24.4% due to severe pandemic restrictions.

Surveys and forecasts by several rating agencies and the central bank predict that India's GDP will grow by 18-22% in the first quarter of fiscal year 22. The most optimistic forecast comes from the Reserve Bank of India, which is forecasting 21.4% growth for the quarter. The rating agency ICRA is forecasting growth of 21% for the first quarter, SBI's Ecowrap estimates quarterly growth from April to June at 18.5%. The first quarter results released tomorrow are official estimates of the damage caused by the second wave of the Covid19 pandemic, which would have been much more serious than the first.

 Here are the main indicators to keep an eye on in GDP data:

 Agriculture: Given the poor GDP performance of other sectors, agriculture has been the only bailout for the economy over the past few quarters. In a sense, the Indian agricultural sector saved the economy over the past year. Agriculture is expected to grow in the first quarter, but this could offset the damage the second wave of pandemics did to other sectors.
However, growth in the agricultural sector could be sluggish if the second wave spreads to rural areas. Agriculture and related activities grew 3.4% at constant prices in the first quarter of 2020/21. The agricultural sector grew by 3% at constant prices in the first quarter of 2019-2020.

Manufacturing: A major pain point for India has been the slow recovery in manufacturing. Production declined 39.3% in the first quarter (April-June) of last year, after increasing 3% in the first quarter of 2019-2020. Manufacturing finally recovered 6.9% in the January-March quarter (Q4) of the last fiscal year. Production is expected to increase sharply in the first quarter of FY22. The arrival of the second wave and restrictions imposed by state governments forced a number of units to close. However, since the data is calculated on a one-year basis from April to June 2020, strong growth is expected.

 Investment and Infrastructure: Growth in investment and infrastructure, as reflected in gross fixed capital formation (GFCF), is essential to resume the job creation cycle. The GFCF was 32% of GDP in the first quarter of 2019-2020 but fell to 22.3% of GDP in the first quarter of last year. A recovery in investment demand is essential for economic recovery. Investment demand had already slowed before Covid-19 hit India as overall economic growth slowed and the private sector lost confidence.

Consumption: Private consumption expenditure (CCTB) measures household expenditure. In the first quarter of 2019-2020, the CCCTB accounted for 56.4% of GDP, but fell to 54.3% in the April-June quarter of the last fiscal year due to the first wave of the pandemic and its aftermath . the country. However, in the last quarter of 2020-2021, it improved to 55.4% of GDP. The drop in spending is the result of massive job and wage cuts after the lockdown, forcing households to postpone shopping and saving. Budget spending could remain subdued despite the ravages of the difficult second economic wave. Revitalising this segment is crucial for India's economic growth.

 Services: Retail, hospitality, transportation, communications and broadcasting-related services have reportedly been hit hardest by the COVID-19 pandemic. The sector saw a massive decline of 47.6% in the June quarter, compared to a growth of 3.5% in the corresponding quarter of 2019-2020. In the last quarter of 2020-2021, the industry managed to reduce the decline by 2.3%. As the industry retreated with the easing of restrictions, the second wave of the pandemic derailed the industry. To help the sector recover, the centre organised Rs.3 lakh crore ECLGS for the hospitality, travel and tourism, leisure and sports sectors on March 31 of this year.

Sources:- money control
 

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