New Delhi, Nov 22 (FN Agency) Revival in domestic demand propelled by a receding Covid count and improving vaccination rates is likely to translate into a sequential pick-up in the growth numbers of the September quarter of this fiscal year with real GDP growth for Q2 FY22 pegged at 8% year-on-year as per a DBS Bank group research. The forecast retained the full-year FY22 GDP growth forecast at 9.5% yoy. Festive sentiment in the quarter which reflected in improved consumer sentiments and notable improvement in discretionary mobility trends as well as an easing unemployment rate helped shore up growth prospects. “High inflation would have, nonetheless, weighed on real income growth, particularly at a time when restoration in purchasing power since the second wave is still to near completion,” said Radhika Rao, senior economist at DBS Group Research. According to Rao, Centre’s capex growth accelerated to 52% yoy, a modest decline compared to pre-pandemic Q2 of FY20, and was accompanied by 15% y/y rise in revenue expenditure excluding interest payments which reversed a contraction in the previous of FY22.
Among other boosters, states’ spending rose at a faster clip while higher tax and dividend collections enabled faster disbursements without compromising on the scale of budgeted consolidation. Unwinding of restrictions likely helped ease the disruption in construction activity, apart from weather vagaries. The external sector demonstrated strong performance with goods shipments up 40% yoy in the Sep ‘21 quarter and services up 15% but slowed from quarter before as base effects receded. High commodity prices, however, led goods imports to rise 65%, weighing on the net balance. Notwithstanding stronger global capex push and higher public sector participation at home, industrial activity faced temporary supply disruptions in a few sectors, owing to chip shortages, logistical bottlenecks, and coal shortages, in the quarter. At an aggregate level, base effects are likely to turn less favourable over the next two quarters, moderating annual yoy growth rates.