Key takeaways from GDP data

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The economic system slowed within the final quarter of 2021-22 underneath the influence of the Omicron-driven third wave of the Covid-19 pandemic, because it was anticipated to, however nonetheless beat analyst expectations. In numerical phrases, GDP grew 4.1% within the quarter on an annual foundation, slower than the 5.4% it grew at within the earlier quarter. The 4.1% was additionally the slowest charge of growth in 4 quarters.

For 2021-22, the economic system grew 8.7%, in comparison with a 6.6% contraction the earlier yr. Importantly, nominal GDP grew 19.5%. Most sectors grew neatly in 2021-22 – agriculture by 3%, mining by 11.5%, manufacturing by 9.9%, development by 11.5%, and monetary providers by 4.2%. Funding progress was largely powered by the federal government, which nearly met its difficult capital expenditure goal.

Whereas it’s evident that many sectors of the economic system surpassed their pre-pandemic ranges, there are some worrying developments evident within the information launched Tuesday – manufacturing contracted by 0.2%, in comparison with a 0.3% progress the earlier quarter – and amongst essentially the most regarding is the truth that the fourth quarter information present the overhang of inflation and decrease company income on account of upper enter costs.

The large query shouldn’t be what the numbers say about 2021-22 however what they do about 2022-23, particularly given the federal government’s restricted capability to reinforce its fiscal spending (though the fiscal deficit got here in at 6.7% of GDP, decrease than the estimated 6.9%, on the again of upper income). Personal consumption remained weak within the final quarter (robust authorities consumption was the primary driver of consumption), making it troublesome for firms to go their greater prices on to customers, and excessive frequency indicators proceed to spotlight the Okay-shaped nature of the restoration, with small enterprises and the poor persevering with to languish.

Whereas the federal government has unveiled a number of measures to deal with inflation over the previous two weeks, it’s virtually a on condition that the quantity will stay above the higher band of the Reserve financial institution of India’s tolerance stage of 6% (and that the central financial institution will elevate charges once more subsequent week). Crude oil was buying and selling at round $124 a barrel on Tuesday, though the value of India’s import basket will probably be decrease. Reining in inflation, with out smothering nascent demand goes to be the federal government’s greatest problem in 2022-23, though it could take some coronary heart from Tuesday’s forecast by the climate workplace of a traditional monsoon. And with firms specializing in prices (and ready for demand to select up), it is going to nonetheless must do the heavy lifting on investments.