Data released by the National Statistical Office showed the economy growing by 8.7% in 2021-22 while growth in the January-March quarter slowed to 4.1%. To put the numbers in context, the 8.7% expansion comes against the backdrop of a very low base as the economy contracted by 6.6% in the previous period due to the impact of one of the strictest lockdowns in the world to prevent the spread of the Covid-19 pandemic.
The NSO had earlier estimated growth to be 8.9%. The 8.7% growth is the highest since 8.8% in fiscal year 2000 considering the back series data, and is also the highest in 17 years under the current series which has data for 17 years.
The latest numbers for 2021-22 makes India one of the fastest-growing major economies in the world, although the momentum of expansion in the months ahead would be tested by high inflation and the need to raise interest rates to combat price pressures.
“Recovery has been consolidated. Pre-pandemic levels of activity have been captured in several sectors. India is in a better place than many other nations and the financial sector is in far better shape to support growth,” said chief economic adviser V. Anantha Nageswaran.
India’s economy has scripted a robust recovery after the bruising impact of the Covid-19 pandemic, but in recent months it has faced several headwinds such as high inflation and is battling high food and fuel costs due to the impact of the war in Ukraine and the breakdown in supply chains which have also faced the brunt of the strict lockdowns in China to prevent the outbreak of the latest coronavirus variants.
The latest data showed that the farm sector grew by 3% in 2021-22 compared to 3.3% expansion in the previous year while manufacturing rose by 9.9% compared with a contraction of 0.6% and the construction grew by 11.5% against a decline of 7.3% in 2020-21. Trade, hotels, transport, communication and services related to broadcasting rose 11.1% compared with a contraction of 20.2% while public administration, defence and other services grew 12.6% compared with a contraction of 5.5%. In the January-March quarter, except manufacturing, all other sectors showed robust growth. Manufacturing contracted by 0.2% while construction grew by 2% reflecting the impact of the curbs imposed in the wake of the Omicron variant of the coronavirus. The farm sector was the mainstay in the fourth quarter of 2021-22 growing by 4.1% compared to a 2.2% expansion in the previous year-ago quarter.
Aditi Nayar, chief economist at ratings agency ICRA, said the slowdown seen in India’s GDP growth to a four quarter low of 4.1% in Q4 FY2022 was inevitable, stemming from the adverse impact of the third wave on contact services, and of high commodity prices on margins, as well as the unfavourable base effect. She said the services sector was the main driver of the 3.9% GVA (gross value added) growth in Q4 FY2022. Boosted by government spending, public administration, defence and other services (PADOS) stood out as the fastest growing sub-sector of GVA in Q4 FY2022. Excluding PADOS, GVA growth stood at a muted 3.3% in Q4 FY2022, according to Nayar.
The finance ministry said GDP growth in 2021-22 has recovered to cross pre-pandemic levels of 2019-20 with several sectors except trade, hotels, transport and communication services staging a robust recovery.
“The downward revision in last fiscal’s GDP growth was expected as the Omicron variant and the start of the Russia Ukraine war hit the last quarter. Now the Indian economy in fiscal 2022 was only 1.5% above the pre-pandemic level (fiscal 2020) compared with 1.8% estimated year. But the good part is that estimates for both private consumption and fixed investment estimates are a touch higher than before,” said D.K. Joshi, chief economist at ratings agency Crisil.
Economists said the 8.7% GDP growth in 2021-22 was driven by a largely low base but the numbers showed a solid recovery.
“Base was certainly low given the 6.6% decline in GDP in the previous year. But given that Omicron hit us in FY22 and the Ukraine-Russia war began on February 24, recovery at 8.7% is excellent news. Recovery is also broad-based reflecting solid fundamentals,” Arvind Panagariya, professor of economics at Columbia University said on Twitter.
