GDP grows at 5.4%, fresh risks emerge

New Delhi, February 28

India’s GDP growth rate in the third quarter of financial 2021-22 stood at 5.4 per cent on a year-on-year basis, which was slower than the rise of 8.5 per cent recorded in the second quarter and 20.3 per cent in the first quarter.

The Q3 GDP, at constant prices of 2011-12, is estimated at Rs 38.22 lakh crore, as against Rs 36.26 lakh crore during the corresponding period of 2020-21. On a year-on-year basis, India’s GDP growth rate rose by 0.7 per cent during the corresponding period of the previous fiscal.

New concerns

• Higher prices of crude oil and commodities after invasion of Ukraine
• Growth rate low despite high government spending
• 2022 growth projection revised downwards to 8.9%

Slowest in Q3
Q2 8.5%
Q1 20.3%

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This is the fifth consecutive quarter of positive growth although it is slower than previous two quarters and there are risks ahead due to higher prices of crude oil and commodities after Russia’s invasion of Ukraine.

“The Q3 GDP growth rate at 5.4 per cent is lower than estimates. Most components saw a dip, farm output at 2.6 per cent despite a good monsoon year, manufacturing at 0.2 per cent and construction at minus 2.8 per cent despite activity picking up. As expected, the 2022 growth projection has been revised downwards to 8.9 per cent. Rising inflation, energy and crude oil prices have had a major impact on the growth rate,” said Nish Bhatt, CEO of Millwood Kane International, an investment consulting firm.

“The worrying part is that high government spending failed to lift the growth rate. What is even more worrying is that the high crude prices and geopolitical developments in the Jan-March quarter are likely to put further pressure on the growth rate for full fiscal 2022. The high spending and capex-heavy Budget announced by the government is likely to help with an upward curve in growth rate in fiscal 2023. A further spike in crude prices due to geopolitical tension remains a huge risk for India’s growth rate going forward,” he noted.