India's GDP Grows 8.4% In Q2 Helped By Easing Covid-Related Restrictions

India's GDP grew 8.4 per cent in the July-September quarter, as per the latest data by the Ministry of Statistics and Programme Implementation revealed on Tuesday evening. The economy which is heading back to normalcy benefitted from easing Covid-related restrictions following the second wave of coronavirus disease. 

The year-on-year growth figure was further helped by the low base year. The country's GDP had contracted 7.4 per cent in the comparable period, last year. However, this happens to be the fourth consecutive quarter of growth in GDP.

"While the Q2 FY2022 absolute level of real GDP reverted mildly above the pre-Covid level of Q2 FY2020, the disaggregated data for Q2 FY2022 is far from convincing, with considerable lags in private and government consumption expenditure being absorbed by a sharp rise in valuables relative to the pre-Covid level of Q2 FY2020," stated Chief Economist at ICRA, Aditi Nayar. 

The Quarterly GVA (Gross Value Added) at basic prices in the second quarter grew 8.5 per cent on a year-over-year basis. 

Nominal GDP or GDP at current prices rose 17.5 per cent in the same period. The nominal GDP includes changes in prices, recorded during a specified time period, owing to inflation. It is reflective of the rate of price increases in an economy.

Back in October, the Reserve Bank of India had retained its growth forecast for the current fiscal year at 9.5 per cent. Segmenting it quarter-wise, RBI estimated GDP to expand 7.9 per cent in Q2, 6.8 per cent in Q3 and 6.1 per cent in Q4.

"With the Q2 FY2022 GDP growth higher than the Monetary Policy Committee’s forecast of 7.9% even as uncertainty has reignited following the discovery of the Omicron variant, we expect a status quo in the Dec 2021 policy review. However, the tone may shift, in order to signal an upcoming change in the monetary policy stance to neutral in the Feb 2022 policy review," the ICRA chief economist added. 

In the September-end quarter, construction grew 7.5 per cent, manufacturing by 5.5 per cent and agriculture, fishing and forestry by 4.5 per cent. Contact intensive sectors such as trade, hotel, transport and communication grew 8.2 per cent. 

Finance, Real Estate, Professional Services rose 7.8 per cent. 

Mining and quarrying rose 15.4 per cent. 

Concerns have been looming about the new mutated variant of the coronavirus initially discovered in South Africa, Botswana and Hong Kong. Apprehensions about the Omicron variant were visible last week with bourses registering their worst single-day drop in the last seven months. BSE Sensex fell 1,687 points or 2.87 per cent to close at 57,107.15 on Friday whereas NSE Nifty declined 509.80 points or 2.91 per cent to close at 17,026.45. It must be noted that markets are not necessarily an indicator of the country's economic performance. This is because investors place their money based on future earnings. 

While no case of the mutated variant has been found in the country to date, India in a revised list for 'at-risk countries' added South Africa, Botswana, Hong Kong, Israel and Zimbabwe, among others.

"With the discovery of the Omicron variant of Covid-19 reigniting uncertainty regarding the strength of global demand and cross-border flows, we are maintaining our estimate of a 9.0% growth in real GDP in FY2022 for now, in the absence of concrete evidence regarding the durability of domestic demand," Aditi Nayar stated.