New Delhi: The high GDP growth despite low base of last year has given confidence that the Indian economy may well grow over 9 per cent in FY22 with tailwinds coming from rapid recovery of manufacturing and construction sectors.
The data released by the Union Ministry of Statistics this week showed that the country’s GDP has recovered swiftly to clock a growth of 20.1 per cent in the April-June quarter of FY22 as against a contraction of 24.4 per cent seen in the same period of previous year.
There has been a 49.6 per cent growth in Manufacturing and 68.3 per cent growth in construction. However, much of the growth is due to the low base in Q1 FY21.
Though the Q1 growth is a tad lower than RBI’s expectation of 21.4 per cent growth, it is still on course to make a good recovery taking the economy back to its pre-Covid size.
According to a Bank of Baroda economic research, GDP is expected to grow at 9.7 per cent in FY22. The improving pace of vaccinations, government tax collections, exports and corporate investments in select sectors are a tailwind for growth, it has said.
Taking a similar line, a report by Kotak Institutional Equities expects GDP growth of 9 per cent in FY22 against RBI’s own projections of 9.5 per cent growth. But the brokerage has cautioned that growth momentum may get disrupted if a third wave of the pandemic comes before a larger population gets fully vaccinated. Furthermore, one of the key drivers of growth in CYTD21 has been robust external demand, which risks slowing given the increasing Covid cases globally.
Additionally, surging freight costs and container shortages amid logistic bottlenecks pose downside risks to growth. So may be the pressure of lower agricultural yield this year in the wake of projections of lower than normal monsoon.
Morgan Stanley research has maintained its estimate of GDP growth at 10.5 per cent for F2022.
“We expect economic activity to start normalising from quarter ending (QE) September, supported by pent-up demand, ramp-up of the vaccination drive, favourable policy mix, and robust global growth. We expect GDP growth to move into positive territory on a two-year CAGR basis from QE September,” it said in its report cautioning that slowdown in the pace of vaccinations, trend in Covid-19 cases and restrictions on activity poses risks to smooth recovery of the economy.
An SBI Ecowrap report had brought a more realistic picture of the Indian recovery suggesting that the second wave has still put a lot of sectors on path of degrowth in Q1 compared sequentially with the previous quarter (Q4FY21).
Agriculture sector has been the one that has been pandemic resilient. Its output is 8 per cent above pre-pandemic level. A below normal monsoon poses a risk to its growth in FY22.