Covid chips away at India’s growth

India’s Gross Domestic Product (GDP) in the quarter ending June 2021 grew by a whopping 20.1 per cent on-year, riding on a low base. Amid the business shutdown and strict restrictions on movement, India’s economy had nosedived by 24.4 per cent in the first quarter of last fiscal. Though the growth percentage looks large, India would need some more time to recover from the devastation caused by the pandemic. That too, when the country was already reeling under stress since 2018.

First quarter FY22 below pre-pandemic level

Despite a record jump, India’s Q1 FY22 real GDP was well below the pre-pandemic level of Q1 FY20. India’s GDP in Q1 FY22 (Rs 32.38 lakh crore) is nearly nine per cent below the Q1 FY20 level (Rs 35.67 lakh crore). This shows how the pandemic took away at least two years of India’s economic growth.

Manufacturing and construction sectors had taken a massive blow and succumbed to the strict nationwide lockdown, forcing agriculture to single-handedly carry the baton of the Indian economy during the pandemic. While manufacturing had fallen by 36 per cent, the construction sector had shrunk by nearly half (49.5 per cent).

In the current fiscal’s first quarter, the damage has been repaired to an extent, but the pre-pandemic level is still a distant dream for both areas that are also among the largest employers. In Q1 FY22, manufacturing is 4.2 per cent while construction is 14.9 per cent below the Q1 FY20 levels.

“The sharp YoY expansion in Q1 FY2022 is analytically misleading, with a sequential slowdown of 16.9 per cent over Q4 FY2021 and a shortfall of 9.2 per cent relative to the pre-Covid level of Q1 FY2020,” Aditi Nayar, chief economist at ICRA said.

There will be a modest contraction over pre-Covid levels in the second quarter, as agriculture and industries will be higher, but services will still be lower, she added.

There will be a modest contraction over pre-Covid levels in the second quarter, as agriculture and industries will be higher, but services will still be lower, she added.

A silver lining too

“Though it was feared that the second wave would make a deeper dent on India’s economy, it did not play out that way. The learnings from the first wave helped Indians cope with the second,” Madhavi Arora, lead economist at Emkay Global said.

Going forward, exports and government investments could provide immediate support to the economy, which is expected to reach pre-pandemic levels between September 2021 and March 2022, she added.