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India on course for 9% GDP growth in FY22
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SME Times News Bureau | 01 Sep, 2021
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 on Tuesday 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 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 previous quarter (Q4FY21).
Industry,
which was the worst affected sector during the pandemic, rebounded
sharply in Q1 FY22 (grew by 46.6 per cent) due to 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.
Services sector
exhibited a YoY growth of 11.4 per cent, however, on a Q-o-Q basis the
sector contracted by 11.8 per cent. Though, the growth has seen in
'financing, insurance, real estate & bus Services' but 'trade,
hotels, transportation' and 'Public administration and Defence' has
contracted significantly on a Q-o-Q basis, the SBI Ecowrap report said.
On
the expenditure side, due to base effects the y-o-y growth in Q1 FY22
private final consumption expenditure has been at a record 19.3 per
cent. However, when we look at the Q-o-Q metrics, there is a degrowth of
17.4 per cent. And if we compare with Q1 FY20, the degrowth is 11.9
per cent. "Thus, the recovery has not happened as Indian households
faced the brunt of the second wave in Q1. Another troubling aspect to
the consumption story is that the Government Expenditure, which grew by
12.7 per cent in real terms in Q1FY21, has displayed degrowth of 4.8
per cent Y-o-Y and -7.6 per cent Q-o-Q. Government support to
consumption expenditure declined despite the second wave," the report
said.
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.
But according
to BoB research manufacturing and construction activity are likely to do
well on the back of exports and government spending. Contact intensive
services sector is likely to recover with a lag and rising infections in
certain states pose a risk to services recovery.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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