India Q1FY22 GDP: Prepare For The Illusion Of Record High Growth

Key Components of The GDP

Agricultural output was resilient during the quarter, said Radhika Rao, economist at DBS Bank.

In addition, rural wages benefited from the record procurement of cereals, high food prices and employment support schemes, Rao said. Non-farm wage growth, however, likely felt the heat from slower industrial and service activity, she added.

Uncertainty persists here, too, as infections spread deeper into rural areas in the second wave.

Annual growth in the rural sector is likely to slow modestly in the quarter, as second wave spread deep into the rural countryside, according to Bajoria, who estimates GDP growth in agriculture and allied activities at 2% in Q1FY22 compared to 3.1% in the preceding quarter.

In contrast, the manufacturing and construction sectors are likely to lead the recovery, as consumption of steel and cement remained robust, driven by both higher government spending and export demand, Bajoria said. While manufacturing is forecast to grow by 53% on an annual basis, construction is expected to rise by 70%, according to Barclays’ estimates.

Services will be a mixed bag, more adverse for contact intensive sectors, but the overall impact is expected to be less severe than during the first wave, Rao said.

Despite continued expansive government expenditures, output in the public administration sector is expected to contract, as a large of share of the spending is transfer payments, which will not contribute to GDP, according to Bajoria.

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