India's GDP expands by 5.4% in Q3FY22; govt revises FY22 GDP growth estimate to 8.9%

2 Mar 2022 , 08:10 AM

Indian economy grew by 5.4% in the October-December quarter of 2021-22, according to the data released by the National Statistical Office (NSO) on Monday.

The gross domestic product (GDP) had expanded by 0.7 per cent in the corresponding period of 2020-21, the NSO said.

Real GDP or Gross Domestic Product (GDP) at Constant (2011-12) Prices in the year 2021-22 is estimated to attain a level of Rs147.72 lakh crore, as against the First Revised Estimate of GDP for the year 2020-21 of Rs135.58 lakh crore, released on January 31, 2022. The growth in GDP during 2021-22 is estimated at 8.9 per cent as compared to a contraction of 6.6 per cent in 2020-21.

Nominal GDP or GDP at Current Prices in the year 2021-22 is estimated to attain a level of Rs236.44 lakh crore, as against Rs198.01 lakh crore in 2020-21, showing a growth rate of 19.4 per cent. GDP at Constant (2011-12) Prices in Q3 of 2021-22 is estimated at Rs38.22 lakh crore, as against Rs36.26 lakh crore in Q3 of 2020-21, showing a growth of 5.4 percent.

The next release of quarterly GDP estimates for the quarter January-March, 2022 (Q4 of 2021-22) and Provisional Annual Estimates for the year 2021-22 will be on May 31, 2022.

Aditi Nayar, Chief Economist, ICRA Limited said “While an adverse base was expected to flatten growth in Q3 FY2022, the initial estimates of the NSO are sorely below our expectations (6.2% for GDP), with a marginal rise in manufacturing and a contraction in construction that is surprising despite the heavy rainfall in the southern states.”

The most encouraging piece of the disaggregated GDP data is the 7.0% expansion in private consumption in Q3 FY2022, which coupled with the mild rise in current consumer confidence in January 2022 despite the onset of the third wave, bodes well for the outlook for demand and capacity utilisation. However, the feeble 2.0% YoY rise in gross fixed capital formation was the biggest disappointment, reiterating the tentativeness of the investment cycle.

In addition to the lower than expected print for Q3 FY2022, the growth for Q1-Q2 FY2022 has been mildly revised below the initial level, bringing the second advance estimate for GDP growth in FY2022 in line with our earlier expectation of 8.9%.

The NSO’s implicit GDP expansion of 4.8% for Q4 FY2022 looks rather optimistic, given the fallout of the third wave on contact-intensive services, and the expected adverse impact of the spike in commodity prices fuelled by geopolitical tensions on margins, compounded by an even larger base effect for the ongoing quarter. As a result, we now expect the FY2022 GDP growth to print closer to 8.5%.