NEW DELHI: The Indian economy grew by a record 20.1 per cent in the April-June quarter, helped by a very weak base of last year and a sharp rebound in the manufacturing and services sectors in spite of a devastating second wave of COVID-19 cases.
India is now on track to achieving the world’s fastest growth this year.
While there was a sharp year-on-year expansion, sequentially the economy slowed down by 16.9 per cent over the January-March quarter and was 9.2 per cent short of pre-COVID levels of April-June 2019, according to the first quarter GDP data released by the National Statistical Office (NSO) Tuesday.
The economy had contracted by a massive 24.4 per cent in April-June 2020 after one of the world’s most stringent lockdowns was imposed to curb the spread of coronavirus infections, crippling economic activity. GDP had grown by 1.6 per cent in the January-March 2021 quarter.
The sequential contraction in GDP in Q1 of the current fiscal came after three consecutive quarters of expansion.
GVA expanded by 18.8 per cent year-on-year in Q1 but sequentially it recorded a double-digit contraction of 13.3 per cent given the disruptions in April-May due to the lockdown restrictions imposed in the wake of the second wave of COVID-19.
The rebound in the first quarter of the current fiscal was led by a better-than-expected manufacturing performance and a milder hit to services, combined with a robust pace of vaccinations. Vaccination coverage has risen from 4.7 per cent of the total population in January-March to 24.5 per cent in Q1.
The rebound was led by a near 50 per cent year-on-year jump in manufacturing, 68.3 per cent rise in construction activity and 34.3 per cent growth in services such as trade, hotels and communications.
Agriculture, which was the only sector that showed growth amid the stringent lockdown in April-June last year, posted an impressive 4.5 per cent growth over the previous year. Last year, it had expanded by 3.5 per cent.
Government consumption and exports also picked up.
Despite the record growth in the first quarter, the Indian economy is yet to reach pre-COVID levels.
The size of the Indian economy in April-June 2019 was Rs 35.66 lakh crore, which shrank to Rs 26.95 lakh crore a year later. In the first quarter of the current fiscal, it stood at Rs 32.38 lakh crore.
Barring agriculture, the size of all other sectors is below pre-COVID levels. Manufacturing at Rs 5.43 lakh crore is lower than Rs 5.67 lakh crore in April-June 2019, while sevices at Rs 4.63 lakh crore is way short of the pre-pandemic levels of Rs 6.64 lakh crore.
Agriculture at Rs 4.86 lakh crore is higher than the pre-COVID level of Rs 4.49 lakh crore.
Asia’s third-largest economy contracted 7.3 per cent in 2020-21 fiscal (April 2020 to March 2021) after a nationwide lockdown early last year crippled economic activity.
The economy started to emerge from the deep slump towards end of 2020 but was again hit by the second wave in April-May.
However this time the impact was not so severe because of less stringent localised lockdowns.
The momentum has further picked after the second wave subsided. But some analysts have warned of risks posed by spiking infections from the Delta variant and the slow pace of vaccinations in some states that could delay the economy from reaching its pre-pandemic level of about USD 2.9 trillion to the middle of next fiscal.
While Reserve Bank of India (RBI), IMF and S&P Global Ratings have forecast annual growth of 9.5 per cent in the current fiscal, Moody’s Investors Service sees the economy expanding by 9.3 per cent. World Bank has estimated the GDP growth at 8.3 per cent in the fiscal to March 2022 and Fitch Ratings has put GDP growth forecast at 10 per cent.
Those projections are the highest among major economies, surpassing China’s 8.5 per cent.
Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research, said the economy is expected to be provided momentum by the approaching festive season, accommodative fiscal and monetary policy backdrop, vaccination progress along with better global growth outlook which will continue to be favourable for exports.
“As such, we continue to retain our FY22 GDP forecast of 10 per cent with some downside risks emanating from the possibility of another wave of COVID, besides a long term weakness in consumer sentiment, jobs, and incomes,” Chowdhury said.
Fiscal data was also released on Tuesday that showed a sharp growth of 83.1 per cent in the Centre’s gross tax revenues during April-July of 2021-22 over the corresponding period of 2020-21 and a growth of 29.1 per cent over 2019-20.
“This gives an indication of a significant policy room for the government to uplift its demand and its contribution to output in the remaining part of the current fiscal year so as to ensure that the overall growth performance for the full year of 2021-22 does not fall below the growth expectation of 9.5 per cent,” D K Srivastava of EY India said.
Rumki Majumdar, Economist, Deloitte India said economic activity is expected to pick up rapidly in the second half.
“The pace of the recovery may get pushed by a couple of quarters and flow into the next fiscal year and growth may be robust at above 8 per cent, provided we can keep the infection numbers under control.
“Even if we experience successive waves, they are likely to have a diminishing economic impact, aiding in the pent-up demand accelerating,” Majumdar added. (PTI)