India Reports 8.4% Quarterly GDP Growth- But How Long?

The Indian economy grew by 8.4% in the third quarter, surpassing its pre-pandemic level, as vaccination increased and services activity returned to normal following the devastating second wave of the pandemic in the second quarter.

Gross domestic product (GDP) growth averaged 13.7 percent in the first half of the fiscal year, helped by a good base. As a result, most economists now predict that growth in FY22 would be around 9-10 percent.

While talking to the reporters, Chief Economic Adviser to the finance ministry, Krishnamurthy Subramanian, said, “India is likely to have double-digit growth in FY22, 6.5-7% next year and over 7% thereafter.”

Despite Recovery, Concerns Are Still There 

According to data released by the statistics department, the farm sector increased by 4.5 percent in the September quarter, raised by a favorable monsoon, while the manufacturing sector grew by 5.5 percent due to a surge in festive demand.

As states reduced covid limitations among services activities, construction, trade, hotel, and transportation, financial and real estate services rose at 7.5 percent, 8.2 percent, and 7.8 percent, respectively. Government spending increased at a faster rate in the second quarter, at 17.4 percent. Despite the improvements, private consumption and investment remain low.

“Even if the pace of recovery is sustained in the next two quarters, India’s GDP for the year is expected to be only marginally higher than that in FY20 (by around 2%),” Care Ratings stated in a research note. 

Given that the domestic economy was already dealing with low demand and a slow-moving investment climate before the covid outbreak, Care Ratings expects a rebound in demand and investments to be modest and gradual.

Crucial Factors  

  • After a two-quarter decline last year, this is the fourth straight quarter of positive growth.
  • The GDP print for Q2 FY22 demonstrates a significant improvement in private consumption expenditure.
  • Agriculture benefited from a favorable monsoon, generating a consecutive 4.5 percent increase.
  • Manufacturing increased by 5.5 percent, indicating a resurgence in local demand as well as solid exports.
  • Construction, trade, hotels, transportation, and financial sectors all grew by 7-8 percent due to the unleashing.

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