GDP grows 4.1% in Q4 amid Ukraine war dent

NEW DELHI: The Indian economy is expected to have grown at 8.7% in the 2021-22 fiscal year, as per provisional estimates released by the National Statistical Office (NSO) on May 31, the fastest annual growth rate by a major economy.

The latest annual growth number is 20 basis points lower than the 8.9% forecast, which was made in the second advanced estimates released by the NSO on February 28. One basis point is one hundredth of a percentage point.

While GDP levels in 2021-22 have crossed pre-pandemic levels, incomes and purchasing power for much of the population might still be lagging. This can be seen from the fact that both per capita GDP and per capita private final consumption expenditure for 2021-22 continued to be lower than 2019-20 levels in real terms.

The lower than expected economic performance in 2021-22 was because of a loss of economic momentum in the last quarter of the financial year. While the February projections assumed a GDP growth of 4.8% in the quarter ended March, NSO’s latest statement puts this figure at just 4.1%.

To be sure, the latest growth numbers are better than what was widely expected. A Bloomberg forecast of economists projected the quarter’s GDP growth at just 3.8%.

Headwinds from the third wave of the Covid-19 pandemic, the K-shaped nature of the economic recovery and the squeeze on purchasing power due to high inflation are to blame for this moderation in growth in the quarter, experts said.

“The latest GDP growth number only confirms the criticality of the growth challenge once the favourable base effect dissipates,” said Himanshu, an associate professor of economics at Jawaharlal Nehru University. “The inflationary squeeze on mass demand is only going to make things worse and fiscal policy must do all it can to protect the poor from the pain of inflation.”

GDP growth for the four quarters ended March 2022 were 20.1%, 8.4%, 5.4% and 4.1%, respectively. The corresponding numbers for 2020-21 were minus 23.8%, minus 6.6%, 0.7% and 2.5%.

Both retail and wholesale inflation have been increasing at a fast rate, with the benchmark inflation measure of Consumer Price Index reaching an eight year high of 7.95% in April. The government has announced a host of measures to control price rise and alleviate the pressure on household budgets. These include a reduction of excise duty on auto fuels, reduction of customs duty and imposition of export duties on a host of manufactured goods and export bans.