India beats GDP estimates to grow at 8.4% in Q2, FY22

The Indian economy grew at a pace of 8.4% in the second quarter (Jul-September) of the current financial year, against a contraction of 7.4% during the same period of the previous financial year. In doing so, the Q2, FY22 Gross Domestic Project (GDP) growth projections have beaten a majority of projections—which pegged the growth for the period in the range of 7.8%-8.5%.

“GDP at Constant (2011-12) Prices in Q2, 2021-22 is estimated at ₹35.73 lakh crore, as against ₹32.97 lakh crore in Q2 2020-21, showing a growth of 8.4% as compared to 7.4% contraction in Q2 2020-21,” the press note from the National Statistics Office (NSO) reads.

“GDP at Constant (2011-12) Prices in April-September 2021-22 (H1 2021-22) is estimated at ₹68.11 lakh crore as against ₹59.92 lakh crores during the corresponding period of the previous year, showing a growth of 13.7% in H1 2021-22 as against a contraction of 15.9% during the same period last year,” the NSO note adds.

“GDP at Current Prices in Q2 2021-22 is estimated at ₹55.54 lakh crore, as against ₹47.26 lakh crore in Q2 2020-21, showing a growth of 17.5% as compared to 4.4% contraction in Q2 2020-21,” the NSO has said in the release.

The quarterly GDP has beaten most of the economists’ estimates. While India Ratings projected the Indian economy to grow at 8.3% in Q2, FY22, care ratings expected it to grow in the range of 8.1%-8.3%. The State bank of India expected the economy to grow at 8.1%, while HDFC expected the second-quarter growth at 7.8%. RBI too had projects Q2 GDP growth of 7.9%.

D K Srivastava, Chief Policy Advisor, EY India, says, “Led by a high real growth in public administration, defence services at 17.4% in 2QFY22, the 2QFY22 real GDP growth at 8.4% coming after a growth of 20.1% in 1QFY22 signals the feasibility of the Indian economy showing an annual growth of close to 9.5% for FY22. This would however require continued fiscal support and a broad-based recovery encompassing manufacturing sector as well as the services sector."

“The recovery has been broad-based with most components contributing to growth. Mining, construction, real estate showed considerable growth. A good monsoon year reflected well with high agricultural output. Private consumption is likely to pick up as we near complete normalization. The private capex will likely catch up with government spending and aid growth further,” says Nish Bhatt, Founder & CEO, Millwood Kane International.

While agriculture was up marginally YoY, mining, manufacturing, and construction registered growth in the quarter compared with contraction during the same period in the last fiscal. Mining registered a growth of 15.4% in the quarter, against a contraction of 6.5% in Q2, 2020-21. Manufacturing grew at 5% while construction witnessed a 7.5% growth against a contraction of 1.5% and 7.5%, respectively.

Electricity grew at 8.9% in July-September this year against 2.3% in the same period of the last year

It may be noted that the economic growth in the first quarter of the current financial year was 20.1%, against a deep contraction of 24.2% during the same period last year on account of national lockdown imposed to contain the spread of the coronavirus.

Madhavi Arora, lead economist, Emkay Global Financial Services says, “the continued vaccine drive led mobility ahead and aid the pick-up in the contact-sensitive services sector has helped in a healthy growth print. Even with Y-o-Y moderation to 8.4%, from 20.1% in Q1, reflects largely base effect even as sequential momentum has continued to improve. The data affirm that the economy is on continuous mend and will likely be back to pre-pandemic levels before end-FY22.”

Data released by the NSO also indicates that the private final consumption expenditure in the economy has registered a growth of 8.6% at ₹19,48,346 crore at constant prices in the second quarter of the current fiscal against ₹17,93,863 during the corresponding quarter of the previous fiscal.

Similarly, government final consumption expenditure, too, has gone up to ₹3,61,616 crore from ₹3,32,582 crore in the second quarter of the previous year. Also, gross fixed capital formation, too, has witnessed an 11% rise to ₹11,41,907 crore at constant prices against ₹10,29,574 crore in the same period of the last year.

Additionally, the output of the eight core sectors grew 7.5 % in October, up sequentially from 4.4% in the previous month. The core sector witnessed a contraction of 0.5% in the same month of the previous financial year.