Q4FY21 GDP - GROWTH BETTER THAN CONTRACTION

The GDP for Q4FY21 came in at 1.6% v/s 3% (YoY) and v/s 0.4% (QoQ). And the FY21 GDP shrunk to (-)7.3% v/s growth of 4% in FY20. This was mainly driven by the manufacturing growing 6.9% and construction sector over 14% and that too by the private sector.

Q4 agriculture grew 3.6% v/s 4.3% (YoY) and electricity and other utility services grew 1.9% v/s 2.1%.

India has now reported two consecutive quarters of GDP expansion, after having witnessed two consecutive quarters of contraction earlier in the financial year

The full year contraction in both GDP and GVA were much better than expected and bodes well for the economy if and when the lockdown lifts and the pandemic does get at least a bit in control, assuming vaccination takes off on full throttle. Hope the Govt does wake up and smell the coffee.

 Also remember that this time around, the lockdown and unlock will be on and off, not centralized and will change from state to state. But these numbers do show us how things will pan out – the repressed demand across all sectors will push the GDP to double-digit number. And once again, once things start opening up, manufacturing and construction will drive growth. Consumption will come in later – this will grow only when service sector starts showing growth.

The RBI, in its first bi-monthly monetary policy review for FY22, retained GDP growth at 10.5% and maybe, when the MPC holds the meet on 4^th June, we need to watch and see if the same growth rate is retained in the face of the second wave and slow vaccination.

On another macro data front, fiscal deficit for FY21 was at 9.3% of GDP, lower than 9.5% estimated by the Finance Ministry in the revised Budget estimates. Revenue deficit at the end of the fiscal was 7.42%.

Prior to the GDP data, the core sector data came in and no surprises there – the low base effect saw the growth of eight core sector industries at 56% (YoY) in April. But sequentially, thanks to the second wave, there was a contraction of 15%. The index which contributed 40% to the industrial output witnessed a contraction of 6.5% in 2020-21.

Well, today’s GDP numbers will have no bearing on the coming months or six months FY22 data as the second wave has once again upended everything. The market will likely shrug off these numbers as all eyes and ears will be tuned to the RBI meet on 4^th June – that will be the newsmaker of the week.