India’s economy grew by 4.1 per cent in the fourth quarter of 2021-22, pushing up the annual growth rate to 8.7 per cent, official data showed on Tuesday.
However, growth in the January-March period was slower than the 5.4 per cent expansion in the previous October-December quarter of 2021-22.
The gross domestic product (GDP) had expanded by 2.5 per cent in the corresponding January-March period of 2020-21, according to data released by the National Statistical Office (NSO).
As per the data, the Indian economy expanded by 8.7 per cent in 2021-22 against a 6.6 per cent contraction in 2020-21.
The NSO, in its second advance estimate, had projected GDP growth during 2021-22 at 8.9 per cent China had registered an economic growth of 4.8 per cent in the first three months of 2022.
Experts react
Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank
GDP growth during Q4 FY22, at 4.1 per cent y-o-y , wasn’t a major surprise. While sectors such as agriculture and mining performed generally well, several other sectors reflected the headwinds from Omicron, rising inflation and geopolitical issues. While Q4 growth numbers came in materially lower than recent quarters, this will not deter the MPC from further withdrawal of monetary accommodation in the upcoming June meeting as well as in coming months given the prevailing high inflation.
Going ahead, the Q1 FY23 growth number will likely spike significantly into double digits, but largely reflecting statistical factors triggered by the loss of activities in last year’s Q1 during Delta Covid infection. The real strength of recovery in growth will become clearer from Q2 onwards, based on trends in private consumption and capex.
Madan Sabnavis, Chief Economist, Bank of Baroda
GDP growth in FY22 at 8.7 percent is lower than our forecast which was higher at 9.2 percent and also the second advance estimate of NSO which was 8.9 percent. This is around 1.6 percent higher than the pre-pandemic year. The lower growth has been driven mainly by agriculture which has been pushed back due to a lower harvest of wheat.
Mining and manufacturing also witnessed a pushback- mining could be attributed to the end of the year heat which led to the power crisis in several regions. Therefore there has been a decline by over 1 percent to 11.5 percent for mining. Manufacturing growth has come in lower at 9.9 percent (10.5 percent as per second estimate). This can be linked to the consumer goods segments being downbeat as per the IIP numbers.
Higher than expected growth in construction may be attributed to the push given by the government on capex towards the end of the year as well as the real estate sector which was doing well with demand picking up.
The surprise element was the trade/hospitality segment which registered lower than expected growth as the pent up demand did not quite translate to higher growth. There was an element of revenge spending in this sector that should have ideally led to a higher growth rate.
A positive takeaway is the increase in capital formation (investment) from 26.6 percent to 28.6 percent in Fy22 which can be attributed to the government again. But this takes it back to the FY20 level.
Upasna Bhardwaj, Senior Economist, Kotak Mahindra Bank
While the readings have broadly come In line with expectations, The outlook remains clouded with uncertainties especially with escalating crude oil prices. Further, weak labor markets, limited ability on additional fiscal spends, reduced corporate margins due to rising input prices and weaker global demand remain a concern.
Vivek Jalan, Partner, Tax Connect Advisory, a multi-disciplinary tax consultancy firm
The fiscal deficit for 2021-22 worked out to be 6.71 percent of GDP, lower than 6.9 percent projected by the Finance Ministry in the revised Budget Estimates. The reduction in Fiscal Deficit is mainly on account of more than expected buoyancy in Tax Revenues. The revenue collections were around Rs 27 lakh crore, almost Rs 5 lakh crore above the budget estimates of around Rs 22 lakh crore. There was a growth of around 35 percent over last years revenue collection, led by growth of around 50 percent in direct taxes and supported by around 20 percent growth in indirect taxes. The spurt in tax revenues, especially GST Collection was mainly a result of DGARM, which is the Data Analytics wing of the GST Council. Further changes in the GST machinery provisions like allowing the ITC only to the extent of GSTR 2B figures, suspending/cancellation of GST Number when there is a mismatch between GST Returns, blocking of Input Tax Credit of taxpayers where there is a ‘reason to believe’ that some suspicious activity is taking place, etc have ensured that compliances under GST by the taxpayers have improved and with that the GST collection has also received a push. Increase in GST rates of Solar Panels, footwear, job work in Alcohol Industry, packaging materials, etc including various circulars on supplies like mining, ice-creams clarifying that higher GST rates are applicable, have paved the way for consistently increased GST Collections going forward too.
Vivek Rathi, Director - Research, Knight Frank India
Global spill overs of supply shortages, crude oil shock and higher input costs thwarted India’s growth momentum in 4Q FY22. The impact of these factors was widely witnessed in high frequency mining, manufacturing, and construction indicators. So far in FY23, recovery in India’s domestic macros have been resilient to risks arising from global developments; however, supply side challenges and inflation spikes, which could dampen consumption and investments in the economy, poses near term risk to India’s economic growth.
Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities
The 4QFY22 GDP growth print of 4.1 percent and GVA growth print of 3.9 percnt was in line with expectations even as it indicated that the economy is seeing only a gradual recovery. From the expenditure side, private consumption as well as investment growth were muted in 4QFY22 which reflected in the production side with contraction in manufacturing and weak growth in construction as well as services. However, much of services, especially contact-based services, have picked up in 1QFY23. Growth in 1QFY23 will be high given a low base (1QFY22 GDP was hit by second Covid wave). Underlying growth trends remain mixed and recovery is yet to be fully broad-based. Nominal GDP growth at around 15% in 4QFY22 benefitted from high inflation. We expect FY2023 GDP growth to be around 7.3% with much of the growth being propped up by 1QFY23 print. While taming inflationary pressures will be the primary target, it is unlikely that policy makers will take their eyes of the growth trajectory, especially as recovery is gradual and uneven.
Raghvendra Nath, Managing Director – Ladderup Wealth Management
FY22 Q4 GDP figures were expected to fall to below 4 per cent but have managed to stay at 4.1 per cent. The fall in GDP figures was expected especially due to the slowdown in the rural economy as higher input costs weigh on agricultural outputs. Supply chain disruptions continued to affect our economy. The FY22 GDP figure of 8.7 per cent was in line with the estimates. The high growth figure is mainly due to the low base effect. Though inflation still poses a threat to our economy, RBI will continue to take steps and measures to control it. Unless the food and oil prices rise further, Indian companies have reported strong figures, which would help sustain the growth momentum in the future.
Vijay Kalantri, Chairman, MVIRDC World Trade Center Mumbai - a trade facilitating body
India’s Q4 FY22 GDP growth has considerably slowed to 4.1 per cent rom 5.4 per cent in the previous quarter largely because of poor growth in consumption. Also, our manufacturing sector has contracted 0.2 per cent in Q4 FY22, which reflects the impact of rising raw material cost on trade and industry.
Even our investment is not recovering at a desired pace because of global and domestic uncertainty. India’s per capita income (in real terms) is still below the pre-pandemic level of Rs. 1.08 lakh because of slowdown in the quarterly GDP growth.
We expect economic recovery to face further challenge from future repo rate hikes in the upcoming RBI policy meetings. The only way we can support economic growth is through fiscal side measures such as rationalisation of GST rates, effective implementation of PLI schemes and improving ease of doing business.
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