ICRA has forecast the year-on-year growth of the GDP and gross value added (GVA) at basic prices (at constant 2011-12 prices) at 20 percent and 17 percent respectively in Q1 FY2022, benefitting from healthy Central and state government capital spending, robust merchandise exports and resilient demand from the farm sector.
Regardless, the muted base of last year’s nationwide lockdown has aided in concealing the impact of the second wave of Covid-19.
“Based on our assessment of volumes and available earnings, we have forecast the GVA expansion in industry at a considerable 37.5 percent in Q1 FY2022, led by construction and manufacturing, which experienced significantly less curbs in the just-concluded quarter compared to the situation during last year’s stringent nationwide lockdown,” said Aditi Nayar, Chief Economist at ICRA Ltd.
“In particular, construction activity benefitted from the healthy Central and the state government capex spending in Q1 FY2022 which exceeded even the pre-Covid levels of Q1 FY2020,” she said.
Nayar said despite the higher incidence of Covid-19 cases in rural India in the second wave, healthy crop output, and procurement, as well as higher minimum support prices, appear to have buffered the farm sector’s demand during this challenging period.
“The GVA growth in agriculture, forestry, and fishing is likely to print at 3 percent, benefitting from the healthy rabi harvest,” she added.
The rating agency cautioned that the organised sector is expected to have gained at the cost of less formal space during this period. The available statistics are often unable to capture the pain experienced by the latter, which may result in an overestimation of growth under the present circumstances.
Nayar said the consumer confidence survey conducted by the RBI serves as a useful proxy for demand from the less formal sectors.
“Its July 2021 round indicated that the Current Situation Index barely rose to 48.6 from the record-low 48.5 in May 2021 round, highlighting the continued impact of the loss of income and employment, as well as higher medical expenses experienced by many households as a result of the second wave of Covid-19,” she said. (ANI)
