Pent-up demand lifts construction, manufacturing

Construction, manufacturing, financial services, and agriculture registered growth in gross value added (GVA) in the fourth quarter of financial year 2020-21 (Q4FY21) driven largely by pent-up demand from the first three quarters and stupendous output growth in the fourth, economists and experts said.

However, demand-driven growth in the key sectors of construction and manufacturing also holds ominous signs for the current quarter as the second wave of Covid-19 is seen to have affected demand the most, the experts added.

Construction registered a growth of 14.5 per cent in Q4 as consumers scrambled to complete purchases that had been stuck due to the extended lockdown and slow growth in the first three quarters.

The sharp slowdown in Covid cases post January and easing of all restrictions also seemed to have aided the positive sentiment.

Manufacturing recorded 6.9 per cent growth in Q4, as against a contraction of 4.2 per cent the previous quarter, as factories and industries started functioning at full steam.

“Despite a negative base, the positive growth in manufacturing is worth noting and is reflective of the momentum seen since Q3FY21,” Madan Sabnavis, chief economist at CARE Ratings, said.

He said in the case of financial services, the 5.4 per cent growth seen in Q4, as against 4.9 per cent the previous year, was largely due to yearend filings by lawyers, chartered accountants and others.

In the case of agriculture and allied activities, data showed that growth at constant prices in Q4 was down to 3.1 per cent, compared with 6.8 per cent the previous year. This was because of the high base effect as production of agriculture commodities was robust in the kharif season. However, at current prices, GVA in agriculture and allied activities in Q4 was estimated at 5.1 per cent, down from 14.8 per cent a year ago.

For the full financial year, though of the eight sectors monitored, only agriculture and electricity showed a positive growth as economic activities remained blocked in the first quarter due to the lockdown. Manufacturing registered a negative growth of 7.2 per cent in the full year of FY21 while construction recorded a negative growth of 8.6 per cent, the data showed.