India’s GDP data for the March 2022 quarter, which witnessed challenges such as the Omicron-fuelled third wave and high commodity prices that pushed input costs for companies, is going to be released on Tuesday (May 31). Almost all analysts are predicting the January-March 2022 growth to be lower at 2.7-4.5 per cent than the 5.4 per cent reported in the previous quarter. Here’s what you need to watch out for in the latest GDP numbers:
Agriculture growth has largely been unaffected during the pandemic. It provided positive growth when all other sectors posted negative growth during the lockdown. However, in its report, Bank of Baroda said agriculture growth might be a tad slow in Q4 as compared to government expectations (3.3 per cent against government estimate of 3.5 per cent) owing to lower yield of wheat crops, the conflict between Russia-Ukraine and heatwave conditions. These might pose a downside risk to these projections.
Rating agency Icra said, “The heatwave has adversely affected wheat output in March 2022. We expect both agriculture and industry to post a sub-1% GVA growth in Q4 FY2022.” Gross value added is GDP minus net product taxes.
Farm sector GVA (gross value added) growth was slow at 2.6 per cent in the third quarter ended December 2021, compared with 4.1 per cent growth a year ago.
Manufacturing Growth/ Industrial Sector
Manufacturing growth has been hit majorly during the coronavirus pandemic. GVA growth in this sector growth remained almost flat at 0.2 per cent in the third quarter of 2021-22, compared to a growth 8.4 per cent a year ago.
During the March 2022 quarter, the industrial sector witnessed a limited impact of the third wave. However, the manufacturing volume growth remained subdued in Q4 FY2022. Now, with the Russia-Ukraine conflict and renewed lockdowns in China in March 2022 leading to a spike in global commodity prices, rating agency Icra expects a marginal value-added growth of the industrial sector in Q4 FY2022, dampened by manufacturing and construction. It expects the industry to post a sub-1 per cent GVA growth.
In the services, the trade, hotels, transport, communication & services related to broadcasting were affected the most during the pandemic. The hospitality sector almost stopped with no footfall due to the lockdown and COVID-19 restrictions. The sector saw some recovery in the December 2021 quarter with 6.1 per cent growth, compared with a 10.1 per cent contraction a year ago. Icra expects services growth to be at around 5.4 per cent in the March 2022 quarter.
Investment and Infrastructure
Gross fixed capital formation is an indicator of investment activity in the country. A growth in GFCF indicates a jump in investment in the country. Now, that the country is witnessing an outflow of foreign portfolio investment, this data would be closely watched out for in the latest numbers. GFCF witnessed a growth of only 2 per cent in the December 2021 quarter.
Private final consumption expenditure is the largest component accounting for 60 per cent of the GDP. Its movement has a huge weightage on the entire GDP number. It grew 7 per cent in the December 2021 quarter. Government final consumption expenditure in December 2021 provided support by growing at 3.4 per cent in October-December and is estimated to rise 4.8 per cent year-on-year in FY22.
Analysts have given a wide range of GDP growth forecasts from 2.7 per cent to 4.5 per cent for the quarter. SBI expects growth at 2.7 per cent for the fourth quarter of 2021-22, rating agency Icra sees 3.5 per cent growth, and CRISIL forecasts it at 4.5 per cent. For the full financial year 2021-22, the Asian Development Bank (ADB) has projected India’s growth at 7.5 per cent, while the International Monetary Fund (IMF) expects it at 9 per cent.