The Indian economy grew over 20% in first quarter of FY22. Gross Domestic Product grew at a record pace of 20.1% in the period as against a contraction of 24.4% in the same quarter of FY21. There is no doubt that low base contributed in a big way to these growth numbers, but it is equally important to note that growth in first quarter of the current fiscal is reflective of the fact that the economy is fast getting back to track with the Covid situation improving.

A detailed look shows that while agriculture output grew 4.5%, manufacturing and construction rebounded strongly in the first quarter from the year ago. The manufacturing sector expanded 49.6% while construction was up 68.3%. Core sector output grew by 9.4% .This data is encouraging. The gross fixed capital formation data, which shows growth of 55.26% against 24.4% in the previous quarter, is inspiring again.

Some recent high frequency indicators reflect a similar trend. GST revenue collection remained above the psychological mark of Rs 1 lakh crore for the second consecutive month, in August 2021. Similarly, power demand and auto sales have been on a rise. Merchandise exports have registered strong growth again in August, rising to $33.14 billion, higher by 45.17% Year-on-Year. These data sets raise expectations of better days ahead for the economy.

There are certain watch-outs, however. Gross fixed capital formation constitutes 31.6% of GDP as against 34.6% in the first quarter of FY20. Also, private final consumption expenditure and government final consumption expenditure are still not that encouraging. Private consumption has contracted 8.9% in the June quarter as against the previous quarter. Some services sector, including tourism and hospitality, etc. have continued to lag. The Centre should closely monitor these concern areas.