India posts record 20.1% GDP growth on low base
PRE-COVID LEVEL GROWTH LIKELY BY NEXT YEAR: CEA MANUFACTURING GROWS 49.6% YOY IN JUNE QUARTER
India’s economy grew by a record 20.1 per cent in the first quarter of the current fiscal year, which, however, gives little cause for cheer because such expansion was on a massive contraction of 24.4 per cent in the corresponding three months of the previous fiscal year.
The growth also hides the disruption caused by the second pandemic wave. GDP was still 9.2 per cent lower than in the first quarter of 2019-20, which is in the pre-pandemic period.
Besides, growth during April-june FY22 was 16.9 per cent lower than in the previous quarter, Q4 of FY21, a measure that is one of the most used in other countries.
The statistical department conceded this point and said in a statement: “The growth rates in (Q1), 2021-22 in some cases are unduly high due to the low base.”
India was slightly behind the UK in terms of economic growth in this period. The latter’s economy rose 22.2 per cent on an annualised basis. Quarter on quarter, the UK economy grew by 4.8 per cent.
However, the size of the economy (GDP at current prices) was higher by 2.4 per cent during the first three months of FY22 against the same period of FY20. It grew 31.7 per cent on a fall of 22.3 per cent in April-june 2020-21. This could be due to higher collection in goods and services tax this time.
The finance ministry said the GDP data indicated economic recovery. “India’s economic growth would reach the prepandemic levels by next year,” Chief Economic Advisor Krishnamurthy Subramanian said. Independent experts are not so optimistic.
Former chief statistician Pronab Sen said the coming quarters might not be as robust as believed. “The government has made big
announcements on spending, but they are not showing up in the numbers,” he said.
All segments except agriculture and allied activities and electricity and related activities contracted compared to the first three months of 2019-20 or the pre-covid level. For instance, despite a massive surge of 49.6 per cent in the first quarter of this fiscal year, manufacturing (part of industry) was 4.2 per cent down against the same period of FY20. Construction jumped by 68.3 per cent on the base of a 49.5 per cent decline in the first three months of 2020-21.
However, it was still down by close to 15 per cent against the first quarter of FY20.
The badly hammered trade, hotels, transport sector saw a 34.3 per cent surge this time against a 48.1 per cent contraction last time. The segment fell 30.22 per cent compared to the first three months of 2019-20. Similarly, financial, real estate and professional services grew 3.7 per cent in April-june this time, but they were down 1.5 per cent compared to the first three months of FY20.
On the demand side, investment has still not picked up to pre-covid level. Though gross fixed capital formation rose by 55.3 per cent in Q1 of the current fiscal year on a record 46.6 per cent decline a year ago, it was over 17 per cent less than in April-june 201920. Sen said: “The recovery we have seen is not due to the government but to the private sector. Private investment may taper off in the coming months.” Private final consumption expenditure, denoting demand, was up 19.3 per cent in Q1 of FY22 on a low base of a 26.2 per cent contraction. However, it was still close to 12 per cent less than Q1 of FY20. Government final consumption expenditure declined 4.8 per cent in Q1 of FY22 on 12.7 per cent growth during the same period of the previous year. It was over 7 per cent higher than in the first quarter of FY20.
Sunil Kumar Sinha, principal economist at India Ratings, said economic recovery would continue to need both fiscal and monetary policy support in the near term.
transactions for digital retail payments grew by more than 80 per cent from 24 billion in 2018-19 to 44 billion in 202021. Over the next three years, the RBI expects more than 200 million new users to adopt digital payments, with the average annual transactions per capita rising tenfold from 22 to 220. The deal is also significant for Prosus as its investments in India over the last five years touched $10 billion. The transaction, which is subject to approval from the Competition Commission of India (CCI), builds on the previous successful acquisitions by Payu in India, including Citruspay, Paysense, and Wibmo.
The last major merger and acquisition (M&A) deal in the Indian payments sector was in 2015, when Snapdeal acquired Freecharge for $400 million. In 2016, Payu acquired Citrus Payment Solutions for $130 million. Last year, Payu bought consumer lending platform Paysense for $185 million.
“This acquisition (Billdesk) refocuses our strategy in India. If you look at the business of Payu and Billdesk, they are complimentary. We believe that the digital payments segment will grow by a factor of 10 for the next few years. Payments and fintech is a core segment for Prosus and India remains our number 1 investment destination,” said Bob van Dijk, group CEO of Prosus.
Billdesk, founded in 2000, is an Indian success story and one of the leading payment businesses in the country. The company was founded by M N Srinivasu, Karthik Ganapathy, and Ajay Kaushal and is the largest and oldest player in the B2B2C payment space, and also one which has been profitable.