GDP Q1FY22 – BABY KO ‘BASE’ PASAND HAI!!

The YoY GDP picture looks completely skewed. And sequentially too, Q1 picture is looking big because of the second wave being at its peak in Q4, when lockdown on account of the second wave took its toll.

Q1FY22 GDP came in at 20.1% v/s (-)24.4% (YoY) and v/s 1.6% (QoQ). The lower base effect makes the Q1FY22 growth look deceptively high but then one should always learn to look beyond such deceptions.

Insights into GDP: (QoQ)

• GDP – 20.1 v/s (-) 24.4% (YoY)
• Agriculture – 4.5% v/s 3.1%
• Manufacturing – 49.6% v/s 6.9%
• Construction – 63.8% v/s 14.5%
• Utilities –   14.3% v/s 9.1%
• Mining – 18.6% v/s (-) 5.7%
• Trade, Transport & Hotels – 34.3% v/s (-) 2.3%
• Financial Services – 3.7% v/s 5.4%
• Public Admin – 5.8% v/s 2.3%
• Services 11.4% v/s 1.3%
• Electricity 14.3% v/s 9.1%

Agriculture, to the surprise of many, did well sequentially as it was largely expected to hover around 3% as this time around, the virus struck rural India. But what did not come as a surprise is manufacturing and construction, which led the recovery on account of higher Govt spending and robust exports. The increase in consumption of steel and cement had already given us an indication of this. Services continues to lag behind but the only succor is that its not as bad as previous Q1 – things are slowly improving there.

Second half, if the virus does remain in control will be very good. Global demand is coming in, liquidity is good, vaccination pace is picking up and more importantly, cyclically, this is the best period as demand is hugely driven by the festive season. Adding to that will be the wedding season and lots of pent-up demand. All sectors are hinging on this hope the light of festivals will show them light, hopefully enduring light.

The underlying worry, the huge uncertainty which is keeping consumption from taking off full steam and demand taking off is the possibility of the third wave. The supply chain disruptions are yet to be fully established and if the Delta causes further havoc, the fragile recovery could see some serious cracks.

Before the GDP data came in, the CGA released data on the fiscal deficit. This, for April to July period came in at Rs.3.2 lakh crore, which is 21.3% of the budget estimate for the year. For the comparable period a year ago, the fiscal deficit stood at 103.1%.

India did not really get any massive stimulus like other countries; our Govt went in for increased spending on infrastructure, tax reforms, providing foodgrains to the poor and privatization of PSUs. These are good in the long term but once again, will bear fruits only if the third wave is nipped.

We all have learnt to live with the virus thriving amongst us; we might never see another lockdown like that of 2020 and hopefully no more grim scenes of death we saw earlier this year. So, even if the third wave comes, which seems inevitable given the way people are currently behaving irresponsibly, maybe the mayhem will not be too devastating.

Hold on to your cash and sit tight; let this also pass and then let go!