Updated on: Wednesday, September 01, 2021, 05:41 PM IST

GDP growth expands 20.1% in Q1; better-than-expected, says India Inc

A better-than-expected manufacturing performance, a milder hit to services and a rebound in consumer spending helped the Q1 growth in spite of a second wave of COVID-19 cases. | Image by Mango Matter from Pixabay

A better-than-expected manufacturing performance, a milder hit to services and a rebound in consumer spending helped the Q1 growth in spite of a second wave of COVID-19 cases. | Image by Mango Matter from Pixabay


India's GDP grew by 20.1 per cent in the April to June quarter (Q1 FY22) as compared to contraction of 24.4 per cent in Q1 FY21, government data released on Tuesday showed.

A better-than-expected manufacturing performance, a milder hit to services and a rebound in consumer spending helped the Q1 growth in spite of a second wave of COVID-19 cases.

Industry reactions

D.R.E Reddy, CEO and Managing Partner, CRCL LLP

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.

Ram Raheja - Director, S Raheja Realty

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.

Upasna Bhardwaj, Senior Economist, Kotak Mahindra Bank

The GDP figures for the first quarter came in marginally weaker than our expectations. However, economic activity has been reviving since July and has picked up momentum. As vaccination pace picks up we expect the momentum to pick up further, although remain wary on the evolution of delta variant cases.

Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank

The 20.1 percent year-on-year growth in GDP during Q1 2021-22 is broadly on expected lines. While this is a sharp uptick optically, this should not lead to any exuberance as the statistical effect of the 24.4 percent contraction in the corresponding quarter of the previous financial year played a dominant role in pushing the current print higher.

Going ahead, without any fresh headwinds as regards the Covid-19 scenario, GDP growth is expected to hover around the mid-single digit zone. Overall, the need for continued policy support for the real economy remains strong given the nascent and uneven nature of the recovery. Progress of vaccination will likely remain a key factor in ensuring medium term sustainability of recovery in economic activities.

Rohit Poddar, Managing Director, Poddar Housing and Development Ltd.

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.

Dr. Alok Sheel, RBI Chair Professor in Macroeconomics at ICRIER - Indian Council for Research in International Economic Relations

As expected, headline real GDP growth in the first quarter of 2021-22 came in at a spectacular 20.1 percent. First, this number is underwhelming even when the base effect of the precipitous fall of (-)24.4 percent in the first quarter last year, when the economy reeled under the shock of one of the most sudden and stringent lockdowns globally associated with the first phase of Covid-19, is stripped away. Seen in perspective, this year's first quarter GDP growth is lower than not only what it was in the last pre-pandemic first quarter of 2019-20, but also of 2018-19.

Second, this under-performance is likely explained by the second wave of the pandemic, which was far deadlier than the first wave. Lockdowns during the second wave were far less stringent than during the second wave, and mostly localised decisions. This almost certainly limited the damage to the economy which might otherwise have seen another precipitous fall.

Third, the sector that has underperformed the most is trade, hotels, transport and communications. It is well known that suffered the most during the second wave. This is reflected in the numbers now put out.

Dr M Govinda Rao, Chief Economic Advisor of Brickwork Ratings

The first quarter growth of GDP in the current year at 20.1 percent comes as a pleasant surprise and is quite close to the growth estimate put out by the RBI. Brickworks own estimate was way too lower, and it appears that the disruptions caused by the second wave were not as severe as we had presumed. In particular, sharp turnarounds in the growth of GVA in manufacturing at 49.6 percent and more importantly in construction at 68.3 percent 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 percent.

The industry sector has shown a growth of 46.1 percent whereas, the service sector, still has a lot to pick up as it recorded a growth of just 11.4 percent. The growth of public administration. defence and other services, however, has been muted at 5.8 percent and this is a clear indication that the government has been far too cautious in increasing its expenditures to contain the fiscal deficit.

On the expenditure side, the performance of private consumption and investment continue to be on a slow track, and this also point to the need for heavy lifting needed by the government to fast track the recovery process. The fast-paced global recovery may help the exports to grow but the government will have to act swiftly in correcting the protectionist stance, fast tracking trade agreements and keeping the exchange rate at a realistic level.

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.

Mohit Ralhan, Managing Partner and Chief Investment Officer, TIW PE

Inspite of the alarming second wave of COVID-19, the Indian Economy has demonstrated remarkable resilience with growth of 20.1 percent in June quarter. The 49.6 percent 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 $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.

Vijay Kalantri, Chairman, MVIRDC World Trade Center Mumbai

The 20 percent growth in India’s GDP in the first quarter has come largely because of the favourable base effect of the year ago quarter, when there was a strict national lockdown. India’s improving global competitiveness is also a key driver of GDP growth as our exports grew 8.7 percent even when compared to the April-June quarter of FY20, which was a normal year. However, the key cause of concern is the slow pace of recovery in trade, hotels, transport, communication and other services, which are still lower by 30 percent from the pre-pandemic level (Q1 FY20). Trade hotels and restaurants employ the largest share of workers (13.2 percent) after agriculture (45 percent). Therefore, we need to support swift recovery in this sector to save jobs. The government’s attempt to bring more informal workers under the social security net through the e-Shram portal can drive consumption in the longer run, and give a boost to economic growth

Rajani Sinha, Chief Economist and National Director - Research, Knight Frank India.

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 percent as against a low of 24 percent 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.

Dr. D.K. Srivastava, Chief Policy Advisor, EY India

1Q 2021-22 output and GDP growth data reflect the differential impact of COVID-1 vis-à-vis. COVID-2 waves. Both affected the 1Q performance respectively in 2020-21 and 2021-22. The adverse impact of COVID’s second wave has largely dragged the performance of the key service sector namely trade, transport, storage et. al. which grew by 34.3 percent in 1Q of 2021-22 as compared to a contraction of (-)48.1 percent in 1Q of 2020-21. This has resulted into a significantly lower output of this large service sector as compared to its level in 1Q of 2019-20, which is lower by (-)30.2 percent.

In terms of nominal magnitude, this amounts to a contraction of Rs 2.1 lakh crore. The overall real GDP growth in 1Q of 2021-22 at 20.1 percent could not make up for the large contraction of (-)24.4 percent in the corresponding quarter of the COVID year resulting in a lower real GDP magnitude by a margin of Rs 3.3 lakh crore as compared to the 1Q 2019-20 level. The positive news from the output side came from agricultural and electricity, gas, water supply et. al. sectors which did relatively well as compared to even their 1Q 2019-20 levels. On the demand side, a positive outcome is noticeable in exports.

Shweta Thakker, Chief Sales & Marketing Officer, AhujaHIVE

The Indian economy continues to grow as the GDP data reports of the first economic quarter reach an unexpected high of 20.1 percent on the back of promising inflation numbers announced earlier citing a low base effect. Some of the key indicators that capture India’s positive economic performance are the uptick in investment demand and the promising nature of consumer spending despite hitting rock bottom in the first two waves followed by the pandemic induced lockdown. The construction sector reportedly grew at 68.3 percent against a contraction of 45 percent in the past year citing an uplifted consumer confidence across the realty sector. The industry is slated for a much more fast paced recovery as compared to the disruption caused by the first wave in tandem with strong signs of revival in the economy.

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Published on: Tuesday, August 31, 2021, 08:14 PM IST