GDP growth to slow down for 3rd straight quarter, show estimates

The National Statistical Office (NSO) under Ministry of Statistics and Programme Implementation (MoSPI) will release the official estimates for the gross domestic product (GDP) growth in the January-March quarter and the full financial year today.

If ratings agencies and financial institutions’ assessments are to be believed, the country’s economic activity lost momentum in Q4 of FY22, primarily due to geopolitical tensions, including the Russia-Ukraine war, higher commodity prices and Omicron spread. Various estimates show the GDP growth could be limited to 3.5-5.5% in the fourth quarter of 2021-22.

State-owned State Bank of India has projected India's GDP growth for FY22 at 8.5% and Q4 FY22 at 2.7%, though it believes the projection for the January-March quarter is clouded by significant uncertainties. Even a 1% downward revision in Q1 GDP estimates of FY22 from 20.3% – and if all other things remain unchanged – could push Q4 GDP growth to 3.8%, says SBI, adding that due to a spate of customary quarterly revisions in FY22, it's difficult to accurately forecast the growth.

Ratings agency ICRA says the country’s GDP growth and gross value added (GVA) at basic prices in Q4 seem to have eased to a tepid 3.5% and 2.7%, respectively. It attributed higher commodity prices on margins, a decline in wheat yields and hiccups in contact-intensive services amid Covid-19 and a high base for a slower recovery in Q4 FY22.

Aditi Nayar, chief economist, ICRA says during Q4, the Omicron-fuelled third Covid wave arrested the momentum in contact-intensive services and pervasive pressure on margins from higher commodity prices.

"Moreover, the heatwave has adversely affected wheat output in March 2022. We are apprehensive that both agriculture and industry will post a sub-1% GVA growth in Q4 FY2022, whereas services growth will print at around 5.4%,” she adds.

The median estimates of 13 economists polled by Bloomberg show the GDP growth slowing to 3.8% in the January-March quarter of 2021-22, while GVA is seen dipping to 3.6% in the said quarter. For the full fiscal year, the GDP is seen growing at 8.8%.

DBS group has predicted the economy to grow at 3.7% on a year-on-year due to mobility issues in the wake of the Omicron wave in the country in the January-March period.

Meanwhile, global ratings agency Moody’s has also revised its growth projections for India during the calendar year 2022 downwards to 8.8%. The World Bank, in its Global Economic Prospects report, had also projected India’s economy to expand by 8.3% in the current fiscal 2021-22.

India's GDP in the third quarter of 2021-22 rose 5.4% year-on-year to ₹38.22 lakh crore, while GDP growth in Q2 FY22 was 8.5%. In the first quarter of 2021-22, the country's GDP grew 20.3%, primarily due to a low base and negative growth in the previous fiscal year.

For 2021-22, MoSPI had revised the real GDP growth estimate downwards to 8.9% compared to its earlier forecast of 9.2%.