At 6.6%, India's GDP contracted less than projected in FY21: NSO data

FY22 growth may NOW dip to 8.8% vs 9.2% estimated earlier; core growth across eight sectors clocks 8.4%

India’s economic growth in financial year 2021-22 (FY22) may dip to 8.8 per cent from the 9.2 per cent estimated earlier as the statistics office on Monday said the coronavirus pandemic had a lesser debilitating effect on the economy in FY21 than what was estimated earlier.

The first revised estimates of gross domestic product (GDP) data for FY21 released by the National Statistical Office (NSO) showed GDP contracted 6.6 per cent, against the 7.3 per cent dip estimated earlier.

This creates a less favourable base for FY22, thus dragging down GDP growth to 8.8 per cent. The NSO also revised down GDP growth for FY19 to 3.7 per cent from the earlier estimate of 4 per cent.

“FY21 GDP contraction pegged at -6.6 per cent from -7.3 per cent earlier. FY20 numbers revised to 3.7 per cent from 4 per cent. At this rate, FY22 growth rate is now at 8.8 per cent. We expect a further jump in FY23 estimates. However, all changes are purely of [the] base in FY20 as of now,” State Bank of India’s Chief Economist Soumya Kanti Ghosh tweeted.

Aditi Nayar, chief economist at ICRA Ratings, said: “In terms of the components of GDP, the improvement between the preliminary and revised estimates was broad-based, led by a considerable uptick in private consumption and valuables, followed by government expenditure and net exports as well as a mild revision in gross fixed capital formation. However, there was a sharp downward revision in inventories for FY21,” she added.

Core sectors

Growth in the eight infrastructure sectors picked up in December to 3.8 per cent as the impact of heavy rains eased, data released by the industry department showed. It had dipped to a nine-month low of 3.1 per cent in November. However, core sector growth remained considerably lower than 8.4 per cent expansion seen in October.

The disaggregated data reveals mixed cues, with two industries contracting (steel and crude oil), two reporting double-digit expansion (cement and natural gas), and the rest displaying a modest 2-6 per cent rise. “We expect the IIP to report a feeble rise of less than 2 per cent in December, and print below the expansion displayed by the core sector for the fourth consecutive month,” Nayar said.

Fiscal deficit

The central government managed to contain its fiscal deficit at 50.4 per cent of Budget Estimates during April-December period of FY22, compared with 145.5 per cent a year ago, on account of sustained revenue collection and targeted expenditure by the government, data released by the Controller General of Accounts showed. Capex spiked in December, with overall capex by central government ministries now standing at 70.7 per cent in the period, still lower than 75 per cent in the year-ago period.

“We anticipate government spending to record a robust momentum in Q4FY22, similar to what was seen in Q4FY21, especially on those items that were included in the Second Supplementary Demand for Grants, such as food and fertiliser subsidies, export incentives/remissions under various export promotion schemes,” Nayar said.