INDIA GDP HIGHLIGHTS FOR Q2 FY22, WHAT TO LOOK FOR? - Hardik Lohiya

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India's economic output increased by 8.4% in the second quarter of the current fiscal year compared to the same period last year. On some levels, this is good news. The figure indicates that the country's economy is recovering from the impact of the COVID-19 outbreak and its associated lockdowns. However, the skew in the numbers indicates that things are not back to normal.

When compared to the same period the previous year, the overall output increased by 8.4%. It's worth noting that even basic movement within the country was only just starting to restart during this time last year. It's also important to remember that certain industries were completely destroyed by the lockdowns, while others remained stable or even grew.

The national economy shrank 24.4 percent in Q1 (April-June) and 7.4 percent in Q2 (July-September) of the fiscal year 2020-2021, the year in which the pandemic wreaked havoc (July-September). During this time, there was also a large outflow of migrant laborers from urban regions to their rural homes. The impact on the informal sector as a result of this can be reasonably attributed to the general drop-in economic activity. The NSO figures for Q2 growth can thus be seen as a return of some migrants to the cities.

Simultaneously, it's easy to understand why, while tourism and hospitality activity is down dramatically, public administration and defense are growing at double-digit rates. With the farm sector maintaining steady and manufacturing and industry actually rising, it's safe to assume that the services sector of the economy is still underperforming, even if the economy as a whole is improving.

The new data also allows for fascinating comparisons between two economic analytical methods: sequential reading and YoY, or year-over-year reading. Sequential growth, or the difference between Q1 and Q2, has been strong. YoY growth has been bubbly as expected. However, whether it remains in the black compared to pre-pandemic levels is a question that only comprehensive post-facto studies can answer.

Private consumption in Q2 was 11% higher than in Q1, but at 57.3 percent of GDP, it was still the lowest in five quarters, dating back to the start of the epidemic. Private consumption is also a figure that corresponds to demand, which, when low, prompts economists to recommend higher government spending.

This data might have a positive impact on the RBI's MPC meeting next week. The policy of low-interest rates and sufficient liquidity is paying off. The way countries around the world deal with Omicron, a new strain of the pandemic, rising inflation, and oil price variations will also have an impact on future global growth rates, and India, as a developing country, would be impacted to a greater extent by these variables.

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