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Q2 GDP expands on pent-up demand; Omicron, services sector key to growth in coming quarters

As India’s GDP grows 8.4% in Q2FY22, the new COVID variant emerges as a threat. Analysts say RBI may start monetary tightening soon and consumption will likely remain subdued

December 01, 2021 / 03:10 PM IST
Representative Image: Shutterstock

Representative Image: Shutterstock

India’s gross domestic product (GDP) at constant prices grew at 8.4 percent in July-September this year, just about covering up the loss in output due to COVID-19 in the last two years, and well below the 20.1 percent mark seen in the previous quarter.

GDP had contracted by 7.4 percent in the corresponding quarter of the previous fiscal. The good news is that most sectors, except trade, transport, hotels and communications, performed well, even if on a low base.

Pent-up demand, after the deadly second wave of the pandemic, had swept the country in Q1, and the absence of nationwide lockdowns helped the economic engines to fire up as infections subsided. Some analysts are predicting 5-5.5 percent growth for the remaining six months of the fiscal year, so that the annual GDP growth may reach close to the 9 percent mark.

There are some important takeaways from the latest GDP print. Analysts believe the RBI may begin monetary tightening; the new COVID-19 variant, Omicron, will likely determine the trajectory of economic growth in the coming quarters and consumption will likely remain subdued.