India’s economic report card posted better than expected figures as GDP grew by 1.6% in the January-March period. The growth figures were better than the 1% median forecast by 29 economists polled by Reuters. For the full financial year 2020-21, the economic contraction was -7.3%, better than the government’s own estimates of -8%. The agricultural sector continued to grow steadily in the quarter, while construction, electricity and other utilities posted strong growth. Although the fourth quarter saw strong GDP growth, some expect a reversal of the trend in the current quarter due to the severe second wave in April and early May.
Construction, a surprise from the manufacturing sector
Govinda Rao, Chief Economic Advisor, Masonry Qualifications: “Construction and manufacturing activities appeared to have recovered more rapidly in the last quarter of fiscal year 21, while the service sector continues to suffer the most with commerce, the hotel segment is estimated to contract by 15.5%. The moderate growth of the civil service is also delaying the revival of growth. ”
Suman Chowdhury, Chief Analytical Officer at Acuité Ratings & Research: “However, what catches our attention is the quarterly GVA printing for the fourth quarter of fiscal year 21. The manufacturing sector registered a year-on-year growth of 6.9% in the fourth quarter which, despite the impact of the base factor , highlights the rebound in industrial activity. In addition, the construction sector has registered a growth of 14.5% year-over-year which, in our opinion, indicates the effect of government capital spending. What is pleasantly surprising is that financial, real estate and other services also posted healthy growth of 5.4% in the fourth quarter of fiscal 21. “
Binod Modi Head Strategy at Reliance Securities: “Manufacturing and Construction contributed significantly in 4QFY21 by growing 7% and 14% year-over-year, respectively, and increasing their contribution to GDP by 50-90 bp. Overall, this number indicates good prospects with the weakening of the second wave. “
Second wave to achieve recovery ahead?
Deepthi Mathew, Economist at Geojit Financial Services: “The impact of the second wave of the pandemic could be seen in the GDP figures for the first quarter of fiscal year 22, as most of the states applied closures and other restrictions starting in April.”
Madhavi Arora, Senior Economist, Emkay Global Financial Services: “The impression of better-than-expected growth is partly due to the healthy corporate results for the March quarter of fiscal 21. We admit that the situation is still changing, and it is too incipient to measure the true impact of the second wave on macro variables. We believe the impact is unlikely to be of the same magnitude as last year. “
Sreejith Balasubramanian, Economist – Fund Management, IDFC AMC: “With the start of the second wave, the key aspects are really how household income and consumption will be shaped, the impact and therefore the contribution of the rural economy at the moment and the behavior of investment and loans “.
Suman Chowdhury, Analytical Director of Acuité Ratings & Research: “WWhile the second wave of Covid is likely to affect these segments in Q1FY22, it is clear that the removal of locks and movement restrictions for June should help the economy regain lost growth momentum for Q2 / Q3FY22 unless that we see a threat from a third wave, etc. Therefore, we continue to maintain our forecast of 10% GDP growth for fiscal year 22. “
Rumki Majumdar, Economist, Deloitte India: “With most states imposing strict closures in April and May, we expect the economic damage from the second wave to remain contained until the April-June quarter. Economic activity will recover rapidly in the second half of the fiscal year. Factors such as falling infections, a possible increase in the rate of vaccination, and upcoming festivals in the coming months will likely drive consumer spending and investment due to strong pent-up demand. “
Relief for RBI MPC
Nish Bhatt, Founder and CEO of Millwood Kane International, an investment consulting firm: “Better than expected GDP data will have a positive influence on the RBI’s credit policy scheduled for the end of this week. In the future, we expect the growth rate to recover thanks to the latest relief measures announced by the government, the gradual unblocking by the states, the normal monsoon, a high level of vaccination and fewer new cases. ” .