India GDP Highlights: India’s economy continued to expand in the July-September quarter, marking the fourth consecutive quarter of growth. India’s GDP grew 8.4% on-year basis against a contraction of 7.4% during the same period last year. The growth showed that the economy remained on the recovering trajectory during the second quarter. India’s economic growth was aided by the re-opening of the economy after the second wave of the Covid-19 pandemic. GDP at constant prices (2011-12) in the quarter came in at Rs 35.73 lakh crore, against Rs 32.38 lakh crore in the previous quarter.
“2QFY22 real GDP growth at 8.4% was in line with consensus expectations. A large part of the growth upside was driven by the public administration, education, health, etc. segment which saw sharp increase in momentum as well as a favorable base effect. Overall, the sharp uptick from the second wave was visible across all segments. Investment growth remained strong even when compared to 2QFY20 (pre-Covid) levels. Growth should remain fairly well supported in 3QFY22 too on account of festive season and opening up of services sector too. Growth remains well on track for a full year growth of around 9.5%. The growth numbers will unlikely play a differentiating factor for the RBI’s policy with its own estimate being at 7.9%. With a new Covid variant starting to spread globally and uncertainty on its impact on the economic scenario, the RBI would possibly wait for some more clarity before moving decisively on the rates. We maintain our call for a reverse repo rate hike in February with the December meeting remaining a close call.”
~ Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities
The Q2 GDP growth data at 8.4% is on expected lines. The nominal GDP however grew at 17.5%, mainly due to the high commodity prices. We are running a risk of higher CPI inflation in the coming quarters. The positive news is that India has staged a smart recovery and the growth momentum is strong. Multiple levers in the Economy like Infra spend, Low-interest rates boosting real estate sector, and consumer demand are going to aid and further the GDP growth in the coming quarters. Let us hope that industrial credit growth, which has been hitherto quite sluggish, picks up in the coming quarters thereby aiding the Economic growth.
~ Raghvendra Nath, MD, Ladderup Wealth Management
India’s real GDP grew 8.4% YoY in 2QFY22/3QCY21, marginally better than our/market forecast. A comparison of India vis-a-vis other major nations reveals that while 3QCY21 growth is the highest in India, it is right in the middle – almost flat – on 2-yr CAGR basis.
GDP details suggest that while Private consumption grew slowly than expected, investments grew slightly higher.
From GVA perspective, while farm, construction and public administration & defense services (PADS) grew faster than expected, it was partly offset by weak manufacturing sector. The sharp improvements in the farm and PADS sectors were the surprise in today’s release, which pushed real GVA growth higher than expected.
Nevertheless, the broad story remains intact. With a weak household sector, consumption may continue to lag. Accordingly, we believe that real GDP growth could be 5-5.5% in 2HFY22, implying full-year FY22 growth of ~9% or just 1% higher than in FY20.
~Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services
S&P Global Ratings on Tuesday kept India’s economic growth forecast in the fiscal year to March 2022 unchanged at 9.5 per cent but raised its predictions for the subsequent year on broadening out of the recovery.
“While capacity utilization levels would have improved in the last quarter, private investment may still take time to recover as corporates and banks remain risk averse given the looming uncertainties. High commodity prices and global supply bottlenecks would pose a challenge for the manufacturing sector. The emergence of the new COVID variant has infused uncertainty in the system. If this uncertainty lingers or aggravates, it would adversely impact business and consumer sentiments, with repercussions on the economic growth,” said Rajani Sinha, Chief Economist and National Director – Research, Knight Frank India.
The central government’s finances continue to benefit from buoyant tax realisations. Fiscal deficit was contained at 36.3% of budget estimate, even while expenditure picked up. The multi-year low fiscal deficit ratio can be attributed to robust revenue growth, outpacing expenditure rise during first half of the fiscal. Capital expenditure at 45.7% of the target also showed encouraging trend in line with the government’s focus on asset creation.
~ Care Ratings
“The economic activity in Q2 FY22 received favorable support from recovery in manufacturing and construction. The gradual removal of lockdown, good monsoon year and an increasing number of vaccinations helped boost consumer confidence. India’s Q1 & Q2 FY22 growth is optically higher due to negative growth in Q1 & Q2 of FY21. The H1FY21 saw the worst growth period in the past few decades as the economic activity was severely impacted due to pandemic-induced lockdowns, but now the indicators are at positive 8.4 %, majorly due to government support across all sectors. Even though the situation has drastically improved this year, several economic challenges such as rising inflation, high input cost, and crude price may limit govt’s capacity to act on the fiscal front. The risk arising due to the Omicron variant are key risks to growth going forward. Continued low interest and easy liquidity policy will help sustainable growth.”
~ Rohit Poddar, Managing Director, Poddar Housing and Development Ltd.
“The Q2 growth rate above 8% has propelled India as the World’s fastest-growing major economy. We saw economic activities returning back to normalcy post the second wave earlier this year. This is the fourth consecutive quarter of positive growth after a two-quarter negative growth witnessed last year. The result of the government spending is visible in the contribution of the real estate and construction sector to the growth. Agriculture has chipped in too on the back of a good monsoon. I hope that the RBI continues to support growth with its accommodative policy even though there is a threat of inflation derailing the trajectory,” said Vikash Khandelwal, CEO, Eqaro Guarantees.
“The Q2 GDP data at 8.4% is in line with most estimates, this pegs the H1FY22 growth at 13.7%. The recovery has been broad-based with most components contributing to growth. Mining, construction, real estate showed considerable growth. A good monsoon year reflected well with high agricultural output. Private consumption is likely to pick up as we near complete normalization. The private capex will likely catch up with government spending and aid growth further. The data will have a positive bearing on the RBI’s MPC meeting next week. The low interest, excess liquidity policy is paying good results. Going forward, the way countries across the globe handle the new variant of the pandemic, rising inflation, and movement of crude price will have an impact on the growth rate across the globe.”
~ Nish Bhatt, Founder & CEO, Millwood Kane International
India’s response to the covid-19 pandemic was from both supply and demand side. This has helped India post strong economic activity, the CEA said.
GDP numbers clearly shows recovery continued robustly this year, said CEA Krishnamurthy Subramanian. He added that recovery is not less noteworthy despite base effect.
During the July-September quarter Trade, Hotels, Transport, Communication & Services related to Broadcasting sector grew at 8.2%.
Public Administration, Defence & Other Services sector grew at 17.4% during the July-September quarter against 5.8% during the previous quarter.
Government Final Consumption Expenditure (GFCE) came in at Rs 3.61 lakh crore in the second quarter of the fiscal year against Rs 4.21 lakh crore in the previous quarter.
GDP at Current Prices in Q2 2021-22 is estimated at Rs 55.54 lakh crore, as against Rs 47.26 lakh crore in Q2 2020-21, showing a growth of 17.5 percent as compared to 4.4 percent contraction in Q2 2020-21.
Private final consumption expenditure grew to Rs 19.48 lakh crore in the July-September quarter, up from Rs 17.83 lakh crore in the previous quarter.
The agriculture sector continued to grow at 4.5% in the quarter under review while Mining and quarrying grew at 15.4%.
Manufacturing sector grew 5.5% in the second quarter while Construction sector grew 7.5%. Both the sectors posted a moderated growth when compared to last quarter.
India’s GDP at Constant (2011-12) Prices in Q2 2021-22 is estimated at Rs 35.73 lakh crore which is higher than the Rs 35.66 lakh crore seen in the first quarter of 2019-20, signalling that India has recovered from the covid induced jolt.
India’s GDP grew by 8.4% compared to 7.4% contraction in the same period last year. GDP at Constant (2011-12) Prices in Q2 2021-22 is estimated at Rs 35.73 lakh crore, as against Rs 32.97 lakh crore in Q2 2020-21.
The CARE Ratings’ Economics Meter spiked in July at 8.25 and then plateaued in the region of 6.5-7 in the next three months. The CEM looks objectively at 14 economic indicators: PMIs, GST collections, eWay Bills, Exports, imports, bank credit, debt issuances, equity issues, CP issuances, power consumption, auto registrations and employment. These indicators highlight the stability that has been achieved in the economy reflecting return of consumption.
~ Care Ratings
Services (including construction) will likely grow by 7.6% YoY in 2QFY22 after an 11% YoY decline a year ago and slowing moderately from 16.1% YoY growth in 1QFY22. A robust construction sector, recovery in contact-intensive services and pickup in government spending will support the services sector.
~ Nirmal Bang Institutional Equities
Crude Oil production declined by 2.2 per cent in October 2021 over October 2020. Its cumulative index declined by 2.8 per cent during April to October 2021-22 over the corresponding period of the previous year.
India’s Eight Core Sector data recorded 7.5% growth during the month of October. Eight Core Sector came in at 15.1% during the April-October period.
After lagging the recovery during the initial phases, Q3 (Q2 of fiscal year) saw services activity playing catch up. Relative control over new infections, and an large increase in vaccination helped improve services activity. Indeed, while supply shortages weighed on manufacturing, the services recovery scaled greater highs during the past quarter. Consumer and business optimism is improving, leading to an up tick in job creation across sectors.
~ Barclay’s Bank
Revenue receipts at 70.5% of budgeted estimates. Revenue Receipts up to October 2021 stand at 12.59 lakh crore against the budget estimate of Rs 17.88 lakh crore.
We peg GDP growth for 2QFY22 at 7%, up from our earlier estimate of 6.7% on better-than-expected recovery in contact intensive services while GVA growth is pegged at 6.8%.
~ Nirmal Bang equities
The fiscal Deficit for the April-October period stands at 36.3% of the Budget estimate of Rs 15.07 lakh crore. Fiscal deficit during the same period last year stood at 119% of the budget estimates.
The Reserve Bank of India has forecasted India’s GDP growth to come in at 7.9% in the second quarter of this fiscal year.
“The Indian economy has performed quite well in the second quarter of the year post the removal of the lockdown from July onwards in most states. The services sector however continued to be impeded by selective opening up due to the challenges posed by social distancing. It was only after September that various state governments gradually opened these services,” said CARE Ratings.
The Q2 FY22 GDP print to be released on 30th November is likely to register a growth of 7.8% y-o-y. On a Gross Value Added (GVA) basis, we expect growth of 7.3% y-o-y. The gap between GDP and GVA is likely to be driven by higher tax revenue collection and lower subsidy pay-outs in this quarter.
~ HDFC Bank
We forecast India’s economy expanded 9.6% y/y in Q3 21 (July-September, or Q2 of fiscal year 2021-22), aided by low base and a gradual reopening of contact-intensive services. Our slightly adjusted forecast (previous: 9.9%) indicates that the economy is still on track to grow in double digits for FY 21-22 at around FY2021-22 (10%), along with rapid growth in nominal activity given higher inflation as well.
~ Rahul Bajoria, Barclay’s Bank