New Delhi, Nov 18 (Bureau) In what could be music to the ears of Indian policymakers and industry, the economy would see year-on-year (YoY) GDP growth of 7.9 pc in Q2 FY2022 at basic prices (at constant 2011-12 prices), benefitting chiefly from the surge in the Government’s spending in September 2021, according to a revised forecast by ICRA. This is an upward revision of 20 basis points (bps) from the previous forecast which pegged the Q2 FY22 GDP growth at 7.7 pc. The rating agency has also revised its forecast YoY growth of gross value added (GVA) to 7.4 pc. The revised projection follows renewed Government spending, says ICRA, with economic activity in Q2 FY2022 finding support from a pick-up in industrial and service sector volumes after the second wave of Covid-19 subsided and rising vaccine coverage which 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. The GoI’s non-interest revenue expenditure expanded by 15.0 pc on a YoY basis in Q2 FY22 and the YoY growth in non-food bank credit rose to 6.8 pc as on 24 September 2021 from 5.9 pc and 5.1 pc, respectively, as on 18 June, 2021 and 25 September, 2020. A late revival of rains brought the total area sown under the kharif season of 2021 nearly at par with last year’s record area. The rating agency projects the GVA growth in industry, services and agriculture, forestry and fishing at 8.5 pc, 7.9 pc and 3.0 pc, respectively, in Q2 FY22. “Additionally, healthy Central and state government spending, robust merchandise exports and continuing demand from the farm sector supported economic activity in that quarter, says Aditi Nayar, chief economist, ICRA Ltd.
“While a normalising base is expected to dampen the YoY growth in GDP in sequential terms, the performance relative to the pre-Covid quarter is likely to have improved markedly in Q2 FY22. In ICRA’s view, the trend in the performance relative to the pre-Covid quarter, is the appropriate metric to gauge the strength of the recovery after the quelling of the second wave, which was accompanied by the sharp rise in vaccine coverage in India during Q2 FY22,” Nayar said. A normalising base is expected to lead to a moderation in the YoY growth of GDP (to +7.9 pc from +20.1 pc) and GVA at basic prices (to +7.4pc from +18.8 pc) as well as most of its sub-components in Q2 FY2022 compared to Q1 FY2022. The chief exceptions to this trend in terms of the GVA sub-components are public administration, defence and other services (PADOS) and financial, real estate and professional services (FRP), which ICRA expects will report a pick-up in the YoY expansion to 7.5 pc and 7.0 pc, respectively in Q2 FY2022 from 5.8 pc and 3.7 pc, respectively in Q1 FY2022. According to ICRA, 22 state governments saw an expansion in revenue expenditure by 13.1 pc in Q2 FY2022, a step up from the 10.6 pc growth in Q1 FY2022. The states for which the data is available are Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Himachal Pradesh, Haryana, Jharkhand, Karnataka and Madhya Pradesh, Maharashtra, Mizoram, Nagaland, Odisha, Punjab, Rajasthan, Sikkim, Tamil Nadu, Telangana, Tripura, Uttarakhand and Uttar Pradesh.