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Strong GDP and Fiscal print in Q1 FY22: Can the Improvement Continue?

Author: Rushit Sejpal

August 31 2021 | Reading Time: 2 Minutes
India posted the best quarterly GDP growth rate of 20.1% in Q1 FY22 after the slump in GDP data in the corresponding period last year. India’s GDP shrank 24.4% in Q1 FY21 with the first wave of COVID-19 infections triggering a national wave of countrywide lockdowns in April and May 2020.

The current quarter’s GDP growth still does not reflect a full economic recovery in India as the country went into another partial lockdown, facing the second wave of the pandemic.

Source: Trading Economics

In Q1 FY22, India’s GDP at constant prices (2011-12) was Rs 32.28 lakh crore, but was still less than the Rs 35.66 lakh crore seen in Q1 FY20. Despite the stellar growth in GDP this quarter, the collected data implies that India has not fully emerged from the pandemic-induced slump.
The agriculture, forestry & fishing industry grew 4.5% y/y in Q1 FY22 versus 3.5% a year ago. It was the only industry to clock growth in Q1 FY21 out of the eight industries featuring in GDP calculation.
Construction activity picked up, growing 68.3% y/y this quarter, while it had declined 49.5% a year ago. However, in absolute terms, growth in this sector is still below the pre-pandemic levels.
Growth in manufacturing returned to Q1 FY20 levels, reaching ~50% y/y in Q1 FY22.
Exports improved significantly, growing 39.1% y/y to Rs 7.7T (23.7% of GDP). Exports in Q1 FY22 were 8.7% higher than in Q1 FY20
Imports grew 60.2% y/y to Rs 8.3T (25.7% of GDP). However, imports in Q1 FY22 were 5.3% less than in Q1 FY20.
Estimates of Expenditure on GDP in Q1 FY22 (at 2011-12 Prices; in Rs Crore)

Source: MoSPI
Trade, transport, hotel, communications, and services related to the broadcasting segment posted growth of 34.3% in Q1 FY22, after declining for four consecutive quarters. Despite the positive growth, the segment remains below pre-pandemic levels. It suffered a massive contraction of 48.1% in Q1 FY21.
The hospitality sector has been the worst hit due to COVID-19 as people were forced to stay at home. To aid the sector’s recovery, the Government of India (GOI) extended an Emergency Credit Line Guarantee Scheme (ECLGS) of Rs 3 lakh crore (as also to the travel and tourism, leisure, and sport sectors).
Fiscal Deficit Crosses Rs 3.21 Lakh Crore in April–July Period
The current fiscal deficit of Rs 3.21T forms 21.3% of the full-year target set by the center versus the 103% rate seen during the corresponding period last year.
The government has pegged fiscal deficit at 6.8% of the GDP for FY22. It has set a fiscal deficit target of Rs 15.07 lakh crore for the financial year.

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