The Indian economy is estimated to have expanded in the range of 7.8 and 8.5 per cent in the second quarter of the current fiscal on the back of robust manufacturing and services sector demand supported by pickup in vaccination coverage, according to economists.
The national statistical commission will release the official second quarter gross domestic product (GDP) numbers on Tuesday. The economy expanded by 20.1 per cent in the first quarter of FY22, on the back of a very low base of (-) 24.4 per cent a year ago
As for the second quarter, economists have scaled up their projections on the back of better-than-expected government spending, robust manufacturing activity and exports.
ICRA has revised its Q2 GDP forecast by 20 bps to 7.9 per cent benefitting chiefly from the surge in Centre's spending in September.
"Economic activity in Q2 FY22 was supported by a pick-up in industrial and service sector volumes after the second wave of COVID-19 subsided and rising vaccine coverage revived confidence. Additionally, healthy Central and state Government spending, robust merchandise exports and continuing demand from the farm sector supported economic activity in that quarter," said Aditi Nayar, chief economist, ICRA.
ICRA has projected the gross value added in industry, services and agriculture, forestry and fishing at 8.5 per cent, 7.9 per cent and 3.0 per cent, respectively for Q2 FY22.
The union government's capital expenditure grew by 51.9 per cent in the second quarter, compared to 26.3 per cent in Q1.
CARE Ratings has also revisited the GDP forecast for the quarter ended September, and estimated the growth between 8.1 and 8.3 per cent, respectively. "With several sectors showing positive tendencies, we have revisited our GVA and GDP forecasts for Q2 this year. Main push is coming from a base effect as well as recovery in manufacturing and construction," said Madan Sabnavis, chief economist, CARE Ratings.
This is higher than Reserve Bank of India's forecast of 7.9 per cent for the second quarter.
Most high frequency and economic activity indicators, including the purchasing managers' index, e-way bills, non-oil and non-gold imports, fared better in the second quarter of the fiscal. The average gross goods and services tax collections improved to Rs 1.15 lakh crore in Q2 from Rs 1.1 lakh crore in Q1. The growth in non-food bank credit rose to 6.8 per cent as on September 24, 2021 from 5.9 per cent and 5.1 per cent respectively, as on June 18, 2021 and September 25, 2020, following the abatement of COVID-19 infections and a faster revival in economic activity during Q2 FY22.
Swati Arora, economist, HDFC Bank expects the share of private consumption, government consumption, and investment in GDP to rise in Q2 FY22. Pegging the Q2 GDP growth at 7.8 per cent, Arora pointed out that due to pent-up demand and easing mobility restrictions in the country, economic activity (as captured by high frequency indicators) fared better in Q2 FY22. Consumer durables and non-durables production improved on a q-o-q basis in Q2 FY22 while government's non-interest revenue expenditure rose by 15.05 per cent in Q2 FY22 as compared to a contraction of 7.3 per cent in the previous quarter.
For the entire 2021-22, the GDP is expected to grow by 9.4 per cent year-on-year in FY22 , HDFC Bank said in a note, adding that the economy is expected to reach pre-pandemic output levels by the end of Q4 FY22. For FY23, the bank said it expects GDP to grow by 7.5 per cent.
Similarly, India Ratings said it expects GDP to grow by 8.3 per cent in the second quarter of FY22, and clock a growth of 9.4 per cent during the fiscal year 2022. Sunil Sinha, principal economist, India Ratings argued that the consecutive nine quarters of over 3 per cent agriculture gross value-added growth has brightened consumer spending. "Therefore, we expect private final consumption expenditure to grow close to 10 per cent in 2QFY22. Even investment activities have found support from the government's focus on infrastructure," said Sinha. He pegged the fixed capital formation growth around 8.5 per cent in 2QFY22.
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