Q1 GDP: Localised lockdowns during the second wave of COVID-19 helps construction activity to grow by 68.3% y-o-y

The construction and financial, and real estate and professional services sectors have clocked a growth of 68.3% and 3.7% percent respectively between April to June FY 2022 due to localised lockdowns across states and most businesses functioning partially, official data released by the National Statistical Office (NSO) showed on August 31.

Also, buoyed by a low base effect, India's construction sector posted a 68.3% growth in the first quarter (April-June) of FY22 (2021-22) despite the second wave of the COVID-19 pandemic hitting the country. Construction sector’s gross value added stood at Rs 2.21 lakh crore in Q1 FY 22. It was Rs 1.31 lakh crore during the same period last year and Rs 2.60 lakh crore during the pre-pandemic period.

During the quarter, construction activity rose 68.3% showing signs of recovery. The construction sector saw the highest growth amongst all the sectors, during the quarter. However, this is against the April-June 2020 quarter wherein construction activity fell about 50% due to stringent lockdown measures which led to construction workers moving back to their hometowns.

“The construction sector witnessed an almost 68% growth over the same period last year. However, it is 85% of the overall gross value addition of pre-pandemic level of 2019. Due to limited restrictions on construction during the second wave, construction continued albeit at a relatively lower level and therefore growth of 68.3% could be achieved. The number stood at -49.5% last year due to the complete lockdown following the first wave,” said Samantak Das, Chief Economist and Executive Director - Research & REIS, JLL India.

However, compared to the pre-pandemic quarter of 2019, the value addition from the construction sector reached at Rs 2.21 lakh crore compared to Rs 2.26 lakh crore in the first quarter of 2019 translating to a 85% gross value addition of the pre-pandemic level.

Financial, real estate and professional services also improved by 3.7% over the same period last year. However, in terms of gross value addition, the financial, real estate and professional services sector has managed to achieve almost the pre-pandemic level by 98.5%, he added.

India’s GDP in the April-June 2021 quarter rose 20.1%, led by a low base effect last year due to the pandemic-led national lockdown in 2020. While the country witnessed a devastating second wave during the April-June 2021 quarter, the lockdowns were more localised, which meant that economic activity did not come to a standstill. The current numbers signals that the Indian economy is on its way to recovery after last year, said Ramesh Nair, CEO, India & Managing Director, Market Development, Asia at Colliers.

“We believe that growth in the construction sector will be led by sustained demand in the residential sector helped by increased affordability of residential properties. Moreover, the ongoing vaccination drive is being held at a fast pace, and will help in infusing optimism in the market. We expect a rebound in construction activity in next two quarters, but it could still remain below pre-COVID levels, amidst uncertainty of third wave,” he said.

Anuj Puri, Chairman - ANAROCK Property Consultants said that  India’s GDP for the April-June quarter of the ongoing FY22 expanded 20.1% YoY, as per data released by the RBI. This was widely expected. While this sharp rise in Q1 GDP is largely due to the low base last year, but the fact is that during the first wave last year there was a complete lockdown in the country and all economic activity came to a screeching halt. As for the second wave, there were only localized lockdowns across the states and most businesses functioned partially.