India’s annual economic growth rate picked up in the January-March quarter compared with the previous three months, but with the second wave of Covid-19 wreaking havoc across the country, economists aren’t too optimistic this quarter. Corona-induced curbs and lockdowns have hit economic activities like retail, transport and construction, putting millions out of work.
According to the data released by the National Statistical Office (NSO) on Monday, the country’s GDP grew by 1.6 per cent in the January to March quarter (Q4 FY21) but contracted by 7.3 per cent in the entire financial year. The economy took a recovery path from the third quarter of FY21 (December quarter) as restrictions were eased; the festive sales also contributed to the 0.4 per cent growth in the third quarter after contracting 23.9 per cent in the first quarter and 7.5 per cent in the second quarter. The economy further improved during the January-March quarter with key indicators bouncing back, including GST collections, employment and demand.
In the fourth quarter, the manufacturing sector, which had risen by 1.7 per cent in Q3, registered a growth of 6.9 per cent. Apart from this, the agriculture, forestry and fishing sector grew 3.1 per cent in Q4. Agriculture has been the only sector to register a growth in all the four quarters.
Consumer spending—the mainstay of the economy—rose 2.7% year-on-year in the January-March quarter, following a revised 2.8% fall the previous quarter, data showed. The construction sector saw the growth of 14.5% during the three months to March. Investments rose 10.9% compared with growth of 2.6% the previous quarter, while state spending jumped 28.3% after almost no growth in the October-December period, data revealed.
But the advent of the second wave seems to derailed the recovery process and the March quarter GDP numbers will have little implication on the current economic growth trajectory. Economists believe that with Covid-19 reaching India’s villages, rural demand and sectors dependent on the rural economy might come under severe stress, affecting the overall consumer spending in a big way.
While ratings agencies had earlier projected India’s economy to register double-digit growth in FY22, the second Covid wave and subsequent local lockdowns seem to have hit the economy hard. No wonder, rating agency Moody’s has lowered its original FY22 growth forecast for India to 9.3 per cent, while Barclays has cut its growth estimate for the country to 9.2 per cent.