India's real gross domestic product (GDP) grew by 20.1 percent in the April-June quarter of the fiscal year 2021-22, a record quarterly print on the back of a low base last year, data released on August 31 showed.
GDP contracted by 24.4 percent in the April-June quarter in FY2021 as the country went into a lockdown to curb the spread of the coronavirus. It was the steepest quarterly contraction in the economy in independent India's history.
The GDP print of 20.1 is at par with consensus estimates. As per a poll of 41 economists by news agency Reuters, India’s GDP was expected to rise 20 percent in April-June 2021.
The Reserve Bank of India had projected Q1 real GDP to grow by 21.4 percent. Nominal GDP expanded at 31.7 percent.
"The numbers are a lot better than what we had expected," said Pronab Sen, former Chief Statistician and head of a standing committee tasked with overhauling India's statistical data collection.
Data released by the National Statistical Office on August 31 showed that the real gross value added for Q1 rose by 18.8 percent. The biggest year-on-year rise was in the construction sector at 68.3 percent. This sector saw the steepest fall in the same period last year at 49.5 percent as construction activity across the country had come to a halt.
"We had said last year that the economy will show a V-shaped recovery. While there has been a health impact of the second wave, the economic impact has not been that large," said Chief Economic Advisor Krishnamurthy Subramanian.
Second wave impact blunted by manufacturing rise
Manufacturing, which fell 36 percent in April-June last year, bounced back to grow by 49.6 percent.
"Manufacturing and construction were the key drivers of the pickup in GVA growth, whereas on the expenditure side, private consumption and investment powered the turnaround in the GDP performance. Nevertheless, all of these sectors remained well below their pre-covid levels," said Aditi Nayar, Chief Economist with ICRA Ltd.
Trade, Hotels, Transport, Communication & Services related to Broadcasting, which saw a 48.1 percent fall in April-June last year, grew by 34.3 percent in Q1FY22, indicating that touch services sectors like hotels, hospitality and tourism continue to be affected by the Covid-19 pandemic and will take time to recover.
"The adverse impact of Covid’s second wave has largely dragged the performance of the key service sector. This has resulted into a significantly lower output of this large service sector as compared to its level in Q1 2019-20. In terms of nominal magnitude, this amounts to a contraction of Rs 2.1 lakh crore," said DK Srivastava, Chief Policy Advisor at EY India.
Agriculture, the only sector which showed growth in Q1FY21 at 3.5 percent, this time around grew by 4.5 percent.
Second wave effects still showed
Though better, sectoral and headline numbers indicate that the recovery has not been as sharp as the contraction in the previous year, mostly due to the furious second COVID wave that peaked in May.
The starkest example is the household consumption, typified by Private Final Consumption Expenditure. In absolute terms, PFCE was 17.84 lakh crore in Q1 FY22, up 19 percent from the Rs 14.94 lakh crore same period last year.
However, PFCE is still 11.8 percent lower than Rs 20.24 lakh crore in April-June 2019-20, the pre-pandemic period. CEA Subrmanian said that this was due to the second wave.
Government Final Consumption Expenditure, however, fell in absolute terms, year-on-year.
The Modi government's infrastructure and public investment push showed in the Gross Fixed Capital Formation figures, which came at Rs 10.22 lakh crore against Rs 6.58 lakh crore in the same period of the previous fiscal."India has been able to get through Q1 with limited economic losses, despite a debilitating second wave. As the country emerges through the pandemic, risks to growth remain centered on a possible third wave," said Rahul Bajoria, Chief India Economist, Barclays.