economy

Indias GDP expands 8.4% in Q2 as Covid disruptions ease

Indias GDP expands 8.4% in Q2 as Covid disruptions ease

Indian economy has gained momentum during the July-September period, inching gradually back to normalcy as coronavirus related disruptions eased significantly in the aftermath of a devastating second wave. Gross domestic product (GDP) for the second quarter of the financial year grew by 8.4% from a year ago, one of the fastest rates among major economies, data released by the government showed on Tuesday. A median Bloomberg estimate pegged the GDP print at 8.3% in the September quarter. The economy had contracted 7.4% in the same period last year. Indian economy has expanded at a record rate of 20.1% in the first quarter, mainly on account of the low base of last year. In nominal terms, without adjusting for inflation, the GDP growth surged 17.5% during the second quarter under review. Manufacturing output increased at a pace of 5.5% during the quarter under review, while construction segment grew 7.5%. Gross fixed capital formation, which is a measure for investments in the economy, surged 11% for the period under review. The GDP growth for Q2 at 8.4% confirms that the economy gained traction in the second quarter. On the supply side, agriculture growth provided support, along with a pick-up in service sector growth at 10.2% as contact-intensive services improved along with financial and real estate sectors. On the demand side, investment growth provided support. The momentum in GDP growth has moved to the positive in the second quarter compared to a contraction in Q1, Sakshi Gupta, Senior Economist at HDFC Bank. Meanwhile, private consumption, as measured by Private Final Consumption Expenditure (PFCE) has increased by 8.6% in the September quarter. Mining & Quarrying during the quarter surged 15.4%, while electricity, gas, water supply and other utility services output rose 8.9%. The GDP growth for Q2 came a tad lower than our estimates, led by disappointment in recovery of industrial sector, mainly manufacturing. Impressive momentum of vaccination, releasing of the pent up demand mainly in services sector, nascent uptick in private investment appetite and accelerated momentum of government spending in H2FY22 will remain supportive hereon, even as elevated inflation and weak rural sentiments are emerging as risks on the horizon, said Garima Kapoor, Economist - Institutional equities, Elara Capital. A faster pace of vaccinations and a drop in cases have also led to a pick up in the economic activity during the quarter. However, the latest threat from the Omicron variant looms large, which has already triggered the return of travel restrictions. While the Indian economy is yet to see any impact, the news is weighing on the sentiments in the currency and stock markets. Services that include hotels and transport segment clocked a growth of 8.2% in the July-September period. Going forward, the Reserve Bank of India (RBI), which has cut key interest rates to record lows and infused massive liquidity to shore up economy, is widely expected to suck out liquidity before normalising rates amid growing inflationary concerns. The Central Bank has forecast annual growth of 9.5% in the current fiscal year. Meanwhile, Moody’s expects Indias economic growth to rebound strongly, pegging GDP growth of 9.3% for FY22, driven by growing government spending and rising demand. The improvement in GDP growth in Q2 is on expected lines. With increased vaccination and economy moving back to normalcy, most high frequency economic indicators have bounced back above pre-Covid-19 levels. Corporate performance as reflected by quarterly results has also been showing healthy improvement in the economy, said Rajani Sinha, chief economist and national director - Research, Knight Frank India. Download.

economy 2021-11-30 Livemint