GDP numbers a positive surprise; construction lynchpin of growth since Q3: SBI

The GDP numbers released by the Centre on Wednesday do not disappoint much and in fact, inspire the market, and it seems the laggard sectors like trade, hotels, transport, etc., will cross the pre-pandemic level in Q1 FY23, SBI Research says in its latest report.

India’s economy grew 8.7% in FY22 against the National Statistical Office’s (NSO) earlier estimate of 8.9%. The Q4 FY22 GDP grew 4.1%, while the GVA growth for FY22 was 8.1%. During FY22, agriculture grew 3.0%, and manufacturing and construction grew by 11.5% and 9.9%, respectively. Financial, real estate and professional services grew by only 4.2% in FY22.

During Q4, apart from manufacturing, all other sectors showed positive growth. Manufacturing declined 0.2%, indicating the slight impact of Omicron variant induced lockdowns. Construction also showed tepid growth of 2.0%.

For FY22, the real GDP was modestly revised downwards by ₹36,000 crore to ₹147 lakh crore as per the first advanced estimate released in early Feb’22, of which ₹27,000 crore alone is in Q4. Quarterly GDP growth for Q1, Q2 and Q3 have also been revised downwards very minimally. The GDP growth for Q1 was revised downwards by 25 bps to 20.1%.

'Trade, hotels, transport, communication & services related to broadcasting’ are the only sectors, which are still not out of the woods. “The FY22 absolute numbers (on constant prices) of this sector at ₹3.04 lakh crore are still 10.3% lower than the pre-pandemic level (i.e.FY20). By Q1 FY23, this sector will reach/cross the pre-pandemic level," the report highlights.

On the expenditure side, both the private and government final consumption expenditure crossed the pre-pandemic level by ₹1.2 lakh crore and ₹0.93 lakh crore, respectively, shows the data.

The gap between the nominal GDP growth and the real GDP growth increased between Q2 FY20 and Q1 FY22, owing to higher inflation, finds the report, adding that it moderated in Q2 and Q3 FY22 but increased modestly in Q4 FY22.

Credit off-take has happened in all sectors, revealing the sector-wise data for April. The personal loans segment continued to perform well, growing at 14.7% in April 2022 and contributing 90% of the incremental credit during the month, driven by ‘housing’, ‘vehicle loans’ and ‘Other personal loans’ segments.

Amid this, customer spending could increase in the near future. "Customers, especially in retail verticals could be having a feel of future run expected in interest rates, and might be front-loading their purchases in days to come giving a fillip to consumer demands in select niche areas," says the report.

On the global front, the economic outlook is marred with downside risks due to the ongoing geopolitical upheaval and its impact on trade, output and prices, says SBI Research. “A sharp increase in most commodity prices and significant tightening of financial conditions due to frontloaded monetary policy actions and high inflation are posing financial stability concerns,” it adds.