India’s GDP grows 8.7% in FY22; 4.1% in March quarter Highest in 22 years

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India’s GDP grows at 8.7% in FY22, (Gross domestic product) 4.1% in March quarter: Govt data. According to data from the Centre, India’s Gross Domestic Product (GDP), for the quarter January-March 2022 was 4.1%.

The GDP grew by 5.4% in the last quarter. The growth rate for Q1 was revised to 20.3% and Q2 to 8.5%.

For the entire financial year 2021-22, the nation’s economy grew by 8.7%.

Context Of India’s GDP grows 8.7% in FY22

India’s GDP grows 8.7% in FY22
India’s GDP grows 8.7% in FY22

 

What is the significance of this story?

There are many factors that are putting pressure on India’s economy and preventing its growth, including the ongoing COVID-19 epidemic and the Russia-Ukraine crises.

Despite these problems, the country’s economy continues to grow at a steady rate and beats the lower estimates.

It is possible to only hope that South Asia’s largest economy will be able to handle the challenges.

What Is The Problems

In 2020-2021, the GDP fell 6.6%

India’s GDP fell 6.6% in 2020-2021 due to lockdowns that were imposed to stop the spread of COVID-19. The economy of India is showing significant improvements compared to the past.

In order to stop the spread of the virus, India was placed in a lockdown across the country on March 25, 2020. This greatly impeded the economy’s growth in fiscal 2020-21.

Tensions

The economy contracted for first time in 40 years

The nation’s economy contracted 6.6% after two consecutive quarters of negative growth. This was the first time it had happened in 40 years. This was caused by a technical recession.

In February, the government released revised estimates for the GDP. According to its projections, GDP was expected to grow 8.9% in FY22.

Factors For India’s GDP grows 8.7% in FY22

Retail inflation has risen to an 8-year record

Retail inflation spiked 8.8% in April to an eight-year-high, which cast a shadow over the economy’s short-term prospects.

The Russia-Ukraine conflict is causing an increase in commodity and energy prices, which is a major drag on economic activity.

The benchmark repo rate was also raised by the Reserve Bank of India (RBI), which took place earlier in the month.

Summary Of India’s GDP grows 8.7% in FY22

In the fourth quarter 2021-22, India’s gross domestic products (GDP), grew by 4.1%. The India’s GDP grows 8.7 percent over the entire financial year 2021-22. In the previous fiscal year 2020-21, economic growth was 6.6 percent lower.

In the January-March 2020-21 period, the gross domestic product (GDP), had increased by 2.5 percent. In the December 2021 quarter, the economy experienced a 5.4% increase.

“Real GDP (or gross domestic product) at constant prices (2011-12), in the year 2021-22 will reach a level Rs 147.36 crore as opposed to the First Revised Estimate (Rs 135.58 crore crore) for the year 2020-21 released on 31.01.2022. According to an official statement, the growth of GDP in 2021-22 was 8.7%, compared with a contraction in 2020-21.”

Gross value added (GVA), which is the GDP less net product taxes and reflects supply growth, grew 8.1% in 2021-22 compared to a contraction in 2020-21 by 4.8%. The net taxes on products increased 16.1% year-on-year, to Rs 11.3 lakh crore in 2021-22. This compares with 24.9 percent a year ago.

The growth rate of the agriculture sector in 2021-22 was only 3.3%, as compared to 3.3% a year ago. According to the most recent data from the National Statistical Office, manufacturing saw an improvement of 9.9% in 2021-22, compared to a contraction in 2020-21.

In 2021-22, trade, hotels, transport and communications, which were the most affected by the pandemic, saw improvement and experienced an increase of 11.1 percent, against a decrease of 20.2 percent last year.

Gross fixed capital formation is an indicator of investment activity and saw a rise of 15.8% in 2021-22 compared to a decline of 10.4 percent in the previous financial years. It grew by 5.1 percent in the March 2022 quarter.

The largest component of GDP, private final consumption, increased by 7.91% in the financial year 2021-22, compared to a decrease of 6 percent a year ago. It grew by 1.8 percent year-on-year in the March 2022 quarter.

Nominal GDP, which takes into account inflation, increases 19.5 percent, compared to a contraction last year of 1.4.

Upasna Bhardwaj, economist at Kotak Mahindra Bank, stated that while the readings are generally in line with expectations the outlook is clouded by uncertainties, especially given the escalating oil prices. Weak labour markets, limited fiscal spending, and reduced corporate margins due rising input prices, as well as weaker global demand, remain concerns.

The March 2022 quarter saw agriculture grow at 4.1% and manufacturing contract by 0.2%.

Suvodeep Rakshit is a senior economist at Kotak Institutional Equities. He stated that, on a quarterly basis from the expenditure side of the equation, private consumption and investment growth were low in 4QFY22. This was reflected in the production side which saw a contraction in manufacturing and weaker growth in construction and services.

“But, many services, particularly contact-based, have seen a significant increase in 1QFY23. Given a low base (1QFY22 GDP), growth in 1QFY23 is expected to be high. The recovery process is still not complete and the underpinning growth trends are mixed. Inflation was a major factor in the nominal GDP growth of around 15% in 4QFY22. The FY2023 GDP growth is expected to be 7.3%, with a lot of this growth being supported by the 1QFY23 printing. Rakshit stated that while taming inflationary tensions will be the main target, it is unlikely policy makers will focus on the growth trajectory as the recovery is slow and uneven.”

Sujan Hajra is the chief economist of Anand Rathi and also the executive director. He stated that “despite the continuing geopolitical uncertainties and supply disruptions, high commodities prices, inflation, and monetary tightening,” India will continue to be the fastest growing major economy in the world with 7.5% growth. Financial markets would benefit from the broadly positive growth figure, which is better than expected for FY22 fiscal numbers and infra number for April 2022.

Bandhan Bank’s chief economist Siddhartha Sanyal said that the 4.1% GDP growth in Q4 FY22 was not a surprise. Although sectors like agriculture and mining did well, many other sectors were affected by Omicron, rising inflation, and geopolitical concerns. The Q4 growth numbers were lower than in recent quarters but this will not stop the MPC withdrawing monetary accommodation at its June meeting and in the months ahead, given the high inflation. The Q1 FY23 growth rate will likely rise to double digits in the future.

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