Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research
"India's GDP growth rose to the fastest pace on record at 20.1% YoY in Q1 FY22 from 1.6% in Q4 FY21 although on expected lines supported by the highly favourable statistical base of the previous year. However, the onslaught of the second Covid wave during Q1 FY22 lead GDP growth to contract sequentially by 16.9% over the Jan-Mar'21 quarter, after expanding for three consecutive quarters. Notably, the decline in the sequential print has been nearly half of what was seen in Q1 FY21 as the lockdown restrictions during the second wave were less severe and more localized in nature compared to the complete nationwide lockdown during the first Covid wave. What has also been better than our expectations has been the performance of the agriculture sector vis-à-vis that in Q1FY21 with a growth of 4.5% (3.5%) and also the contact intensive services as reflected partly by the GVA from trade, hotels, transport, and communication services which surprised on the upside by the YoY growth of 34.3%.
As regards GVA, it expanded by 18.8% YoY in Q1 FY2 but sequentially it recorded a double-digit contraction of 13.3% given the disruption in Apr-May'21 due to the lockdown restrictions. It is interesting to note that within services, sector financial services, real estate, and professional services recorded an expansion of 18.8% QoQ in Q1 FY22.
Acuité continues to maintain a tone of cautious optimism for the remainder of FY22 with the economy expected to be provided momentum by the approaching festive season, accommodative fiscal and monetary policy backdrop, vaccination progress along with better global growth outlook which will continue to be favourable for exports. As such, we continue to retain our FY22 GDP forecast of 10.0% with some downside risks emanating from the possibility of another wave of Covid, besides a long term weakness in consumer sentiment, jobs, and incomes."