GDP Highlights: India’s economy grew 20.1% in April-June quarter; strong growth helped by low-base effect

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Updated: August 31, 2021 8:38:00 pm

India GDP Highlights: India economy continued to grow despite the severe second wave of the covid-19 pandemic during the April-June quarter.

India GDP, EconomyIndia’s GDP at constant prices (2011-12) in the first quarter stood at Rs 32.38 lakh crore. (Image: PTI)

India GDP Highlights: India’s economy grew by 20.1% during the April-June quarter of this financial year, as against a 24.4% contraction seen during the same period last year. The massive growth seen in the first quarter has made India the fastest-growing major economy across the globe. India’s GDP at constant prices (2011-12) in the first quarter stood at Rs 32.38 lakh crore, however still lower than the Rs 35.66 lakh crore seen in the first quarter of 2019-20, signalling that India is yet to emerge from the covid induced slump. The construction sector’s GVA was 68.3% higher than the previous year. The services sector grew at 3.7% from the year-ago period.  In the previous quarter, India’s economy had grown by 1.6%. For the full financial year 2020-21, India’s GDP contracted by 7.3%.

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Highlights

    20:37 (IST)31 Aug 2021
    Economic revival intact

    “The GDP growth for Q1 22 at 20.10 % is well in line with the estimates, and it gives comfort that the economic revival process is intact. But the recovery is not that strong considering the fact that the contraction was deeper. While agriculture and manufacturing continue to contribute to the recovery, construction showed the highest rise among the sectors, 68.30%, which was most affected by the disruption due to the pandemic. While the private, as well as government consumption numbers, remain more or less at the same levels as before with no significant changes as such, the need to give further push to consumption cannot be overemphasized. The policy accompaniment by both the central bank and the government needs to be continued especially in the light of relatively higher price level, and no pick up in credit growth," said Joseph Thomas, Head of Research - Emkay Wealth Management.

    20:36 (IST)31 Aug 2021
    Critical to watch pick-up in consumption GDP

    The sharp growth in Q1 GDP is mainly because of the very low base of last year, when the economy was under a national lockdown. On a sequential basis, most parameters of GDP have fallen in Q1 FY22, due to the adverse impact of the second wave of the pandemic on the economy. However, the adverse impact of the second wave of the pandemic on Q1 FY22 GDP is relatively muted when compared to the impact of first wave and this is also getting reflected by other high frequency economic indicators. The comforting factor is that the investment to GDP ratio has remained above 30% as against a low of 24% touched in Q1 FY21. Pick-up in exports as reflected by the GDP break-up, is a positive signal and is in line with pick-up in global economic growth. Going forward, it will be critical to watch the pick-up in consumption GDP as the consumer sentiments revive. The pick-up in pace of vaccination and movement towards normalcy will aid revival in consumer and business sentiments," said Rajani Sinha, Chief Economist and National Director - Research, Knight Frank India.

    20:35 (IST)31 Aug 2021
    GDP growth pegged at 9% for full year

    From the expenditure approach, private consumption grew faster than expected, while investments were broadly in line. Within investments, while household and states' capex growth weakened last quarter, corporate and center's capex grew faster.

    Overall, there were no major surprises from the policy perspective. Focus will shift to the recovery in July and coming months. With lower base effect, we expect real GDP growth to weaken towards 7-8% in 2QFY22. Overall, we maintain our forecast of ~9% growth in the full-year FY22.

    ~Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services

    20:33 (IST)31 Aug 2021
    49.6% growth in manufacturing encouraging

    "Inspite of the alarming second wave of COVID-19, the Indian Economy has demonstrated remarkable resilience with growth of 20.1% in June quarter. The 49.6% growth in manufacturing was especially encouraging and indicates to the structural strengthening of the Indian economy. India has also significantly ramped up its vaccination drive and it is set to accelerate further.  Our institutions have done quite well in countering the impact of the pandemic on its economy and it is right on track to achieve its goal of becoming a USD 5 trillion economy. As, we have been saying earlier, we are quite bullish on India and looks at every dip in the market as buying opportunity," said Mohit Ralhan, Managing Partner and Chief Investment Office, TIW PE.

    20:19 (IST)31 Aug 2021
    Revival of economy will continue at a faster pace

    The First quarter growth of GDP in the current year at 20.1% comes as a pleasant surprise and is quite close to the growth estimate put out by the RBI. In particular, sharp turnarounds in the growth of GVA in manufacturing at 49.6% and more importantly in Construction at 68.3% show significant revival in these sectors and their resilience in withstanding the restrictions posed by the second wave of the pandemic. Even the contact intensive sector like trade, hotels transport etc. has shown appreciable resilience in recording the growth of 34.3%.  The industry sector has shown a growth of 46.1% whereas, the service sector, still has a lot to pick up as it recorded a growth of just 11.4%. The growth of public administration. defence and other services, however, has been muted at 5.8% and this is a clear indication that the government has been far too cautious in increasing its expenditures to contain the fiscal deficit. 

    Going ahead, the revival of the economy will continue at a faster pace in the coming quarters and even if there is a third wave, the disruptions are not likely to be large due to the progress in vaccination and the resilience of the economy gained after experiencing the first tow waves of the pandemic.  The overall growth for FY22 estimated at 9.5% by the RBI is likely to hold and in fact, even may exceed.  However, the revival of the private investment cycle is quite some time away and is not likely to happen before FY23.

    ~Brickwork Ratings

    19:11 (IST)31 Aug 2021
    Expect better than ever double-digit GDP numbers for rest of FY22

    "The GDP figures post the second covid wave in India are reporting a robust recovery of 20.1% for the April to June quarter. With this, we can expect better than ever double-digit GDP numbers for the rest of Fy22; year backed by a large section of the population taking vaccination and ultimately moving towards normalcy. Stock indexes are reaping high records and from a real estate standpoint, construction has also seen a rise owing to the foresight of the second wave and the tailored reforms to keep businesses and construction operational. The positive developments are watched for to be supported by a supply-side push from reforms and easing of regulations ultimately boosting the Construction segment. Further from here, the growth factor largely relies on increment of disposable income that took a hit during the pandemic," said Rohit Poddar, Managing Director, Poddar Housing and Development.

    18:48 (IST)31 Aug 2021
    Better fiscal numbers on expected lines

    The central government's finances performed better during the first four months (April-July) of the current fiscal compared with the year-ago period. Robust revenue mobilisation on the back of buoyant tax and non-tax collections coupled with re-prioritisation of revenue expenditure has kept fiscal deficit in check at 21.3% of the full-year target. The better fiscal numbers in FY22 compared with FY21 are on the expected lines due to the less stringent lockdown and better preparedness this year in terms of pandemic-response. The recovery from the second wave has been faster as evident from the recent economic data. Various high frequency indicators have been regaining traction since June 2021 which has bode well for the government finances. The Centre has already raised nearly 34.6% of its budgeted full-year receipts by the July end which is 193.4% higher than the total amount mobilised in the corresponding period last year. Whereas the expenditure rationalisation resulted in marginal decline (-14.7%) in total expenditure against the last year’s level, prompting a lower fiscal deficit so far.

    ~ Care Ratings

    18:42 (IST)31 Aug 2021
    Public Administration, Defence & Other Services

    Public Administration, Defence & Other Services GVA grew at 5.8% in the April-June quarter as compared to a contraction of 10.2% last year.

    18:31 (IST)31 Aug 2021
    Outstanding economic recovery

    "With double-digit growth in Q1FY22, the strong recovery can surely be deemed as nothing less than outstanding despite a low base. This GDP reading clearly testifies the resilience of the Indian Economy vs its global counterparts and reinforces the strong fundamentals of the country. The Indian economy has seen a sharp rebound from the onslaught of the Covid-19 pandemic, supported by high government spending, reform measures, monetary policy support, progressive unlocking along with the mega vaccination drive. Based on the estimates, there has been an improvement in the construction sector growth YoY given the economic activities were at a standstill last year. With various reforms and RBI’s resolve to support the financial markets and economy, the Indian economy is well poised to ride the long term structural growth path," said Ram Raheja - Director, S Raheja Realty.

    18:27 (IST)31 Aug 2021
    MNREGA work requirement declining

    MNREGA work requirement has declined in August, as indicated by CEA Krishnamurthy Subramanian. He added that power consumption is indicating strong recovery as well.

    18:26 (IST)31 Aug 2021
    High-frequency indicators showing strong recovery

    High-frequency indicators such as the Google mobility indicator shows activity has picked up, even grocery activity has picked up to pre-covid levels, said Chief Economic Advisor, Krishnamurthy Subramanian

    18:24 (IST)31 Aug 2021
    V-shaped recovery as predicted

    India has seen a V-shaped recovery as we predicted last year, said Chief Economic Advisor, Krishnamurthy Subramanian

    18:22 (IST)31 Aug 2021
    Professional services GVA

    Financial, Real Estate & Professional Services GVA grew 3.7% in the April-June quarter, against a 5% contraction from last year.

    18:15 (IST)31 Aug 2021
    Room for optimism

    “The better-than-expected GDP numbers are room for optimism, especially the growth in the construction sector augur well for the economy. It should result in an increase in credit offtake. There could be some inflationary pressures in the short term. We also see a good pickup in industrial activity across all our clients from varied sectors and remain optimistic on a continuing upswing in the economy. It will be interesting to watch how the Central Bank now looks at the interest rates in its next review, and if tapering is likely to happen even in India," said D.R.E Reddy, CEO and Managing Partner, CRCL LLP.

    18:11 (IST)31 Aug 2021
    GDP at current prices at Rs 51.23 lakh crore

    GDP at Current Prices in the year Q1 2021-22 is estimated at Rs 51.23 lakh crore, as against Rs 38.89 lakh crore in Q1 2020-21, showing a growth of 31.7% as compared to contraction of 22.3% in Q1 2020-21.

    18:04 (IST)31 Aug 2021
    GDP numbers below RBI estimates

    India's economy grew at record-breaking levels in the April-June quarter but was shy of RBI's projection of 21.4%.

    18:02 (IST)31 Aug 2021
    Manufacturing GVA

    Manufacturing Gross Value Added for the first quarter rose 49.6% against a contraction of 36% in the year-ago period. 

    17:48 (IST)31 Aug 2021
    Private Final Consumption Expenditure

    Private Final Consumption Expenditure came in at Rs 17.83 lakh crore in the first quarter of this fiscal year, up from the year ago period  but still lower than the 2019-20 levels. 

    17:40 (IST)31 Aug 2021
    GDP at constant prices at 32.38 lakh crore

    GDP at Constant (2011-12) Prices in Q1 of 2021-22 is estimated at Rs 32.38 lakh crore, as against Rs 26.95 lakh crore in Q1 of 2020-21, showing a growth of 20.1 percent as compared to contraction of 24.4 percent in Q1 2020-21.  

    17:37 (IST)31 Aug 2021
    Construction sector aids growth

    The construction sector posted the strongest growth during the April-June quarter. The construction sector grew at 68.3% against a contraction of 45% in the year ago period. 

    17:35 (IST)31 Aug 2021
    India grows at 20.1% in April-June quarter

    India's economy grew by 20.1% in the first quarter of the current financial year. The sharp jump in GDP is aided by the low base effect. India's GDP contracted 24.4% in the year-ago period.

    17:27 (IST)31 Aug 2021
    Second wave hit construction sector

    The second wave has adversely impacted the construction sector as well, though the disruption seems to be much less than last year. The massive migration of construction workers in the wake of the prolonged lockdown last year completely disrupted the sector, and the contraction in the sector was 49.5%. However, the outmigration during the second wave has been much less and mostly localised. Although the second wave has disrupted the sector, the impact is likely to be much less than last year.

    ~ Brickwork Ratings

    17:21 (IST)31 Aug 2021
    Clash of two contrasting themes

    In our view, the Q2 CY22 data will show a clash of two contrasting themes. Although sequential momentum slowed due to COVID outbreak, the robust performance of India’s tradables sector and a much smaller-than-expected decline in services activity should support much faster GDP growth than we previously expected.

    ~ Barclays

    17:17 (IST)31 Aug 2021
    Electricity generation grows

    Electricity generation (weight: 19.85 per cent in core sector) increased by 9.0% in July 2021 over July 2020. Its cumulative index increased by 14.6% from April to July 2021-22 over the corresponding period of previous year.

    17:15 (IST)31 Aug 2021
    Core sector numbers revised upwards

    The final growth rate of the Index of Eight Core Industries for April 2021 has been revised to 62.6%from its provisional level 56.1%. The growth rate of core sector during April-July 2021-22 was 21.2% (P) as compared to the corresponding period of last FY.

    17:14 (IST)31 Aug 2021
    Petroleum Refinery production

    Petroleum Refinery production (weight: 28.04 per cent) increased by 6.7 per cent in July 2021 over July 2020. Its cumulative index increased by 13.1 per cent between April and July, 2021-22 over the corresponding period of previous year.

    17:12 (IST)31 Aug 2021
    Core sector growth at 9.4%

    The combined Index of Eight Core Industries stood at 134.0 in July 2021, which increased by 9.4 per cent (provisional) as compared to the Index of July 2020. The production of Coal, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity industries increased in July 2021 over the corresponding period of last year.

    17:02 (IST)31 Aug 2021
    Fiscal Deficit at 21.3% of target

    India's Fiscal Deficit came in at 21.3% of Rs 15.07 lakh crore, the fiscal year 2021-22 target.

    16:59 (IST)31 Aug 2021
    Stock markets anticipating strong growth

    Sensex and Nifty soared once again on Tuesday to hit all-time highs. Domestic markets have surged significantly in the first two trading sessions of this week. 

    16:57 (IST)31 Aug 2021
    Strong growth expected in construction sector - Barclays

    Barclays expects the construction sector to post the strongest numbers in the April-June quarterly figures. "Steel and cement demand remains robust, despite the onset of the monsoon season; construction remains a focus of several government programs," they said.

    16:50 (IST)31 Aug 2021
    Repeated state-level restrictions to limit GDP growth at 14% in Q1FY22: Brickwork Ratings

    The economy was well under-recovery from the devastation caused by the first wave of the pandemic until the second wave hit the economy, starting April 2021, bringing the recovery process to an abrupt halt. 

    We expect GDP growth for Q1FY22 at 14% (year-on-year), largely due to a low base in Q1FY21. The subsequent quarters will see an improvement if there is no resurgence of the virus in the form of a third wave. Although many states have started easing the lockdown restrictions recently, economic activities have not resumed completely to their pre-Covid levels.

    ~  Brickwork Ratings

    16:46 (IST)31 Aug 2021
    Lower base helping global economic post higher growth

    Higher growth in the second quarter of 2022, or Q1 FY22 is mainly on account of low base. Almost all the countries have registered double-digit (or near to double-digit) real GDP growth. The average real GDP growth for 17 economies has improved from –0.1% in Q1 2022 to 12.2% in Q2 2022. 

    ~ SBI Ecowrap

    16:41 (IST)31 Aug 2021
    Dalal Street hits record highs ahead of GDP numbers

    Domestic stock markets soared to all-time highs on Tuesday ahead of the quarterly GDP figures. Sensex and Nifty closed at their highest levels ever today. 

    16:40 (IST)31 Aug 2021
    India Q1 GDP preview: Strong double-digit growth expected; economy unfazed by Covid wave, base effect in play

    India’s economy is expected to have grown in double digits during the April-June quarter of this financial year, helped by a low base of the previous year. The expected rebound in economic growth would also stand testament to the strong consumer activity, unfazed by the second wave of the covid-19 pandemic. A recent poll of 41 economists conducted by news agency Reuters indicated that the gross domestic product (GDP) rose 20 per cent in the June quarter, compared to the record contraction of 24.4% in the same period a year ago. Meanwhile, the Reserve Bank of India’s Monetary Policy Committee expects June quarter GDP growth to be at 21.4%.

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