February 28, 2022
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Perspective on Q3 GDP Data by Mr. Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services Ltd.
In line with our forecast (of 5.3%) but lower than the market consensus (5.9%), real GDP growth came in at 5.4% YoY in 3QFY22.
Details suggest that final consumption (private + govt) grew 6.5%, while investments grew 8.3% last quarter._ Within (real) investments, while government capex grew 40.4%, private capex is estimated to have grown only 4%.
The full year FY22 estimate is revised down to 8.9% from 9.2% estimated in Jan’22, implying 4Q growth of 4.8%, also in line with our forecast.
Real GVA growth was only 4.7% YoY in 3Q, lower than our/market forecast of 5.2/5.7%. Industrial activities were almost flat, while services sector grew 8.2% YoY in the quarter.
Overall, 3Q GDP growth was lower than consensus, driven by weak consumption. With <5% growth expected in 4Q, our fear of slower recovery in India is turning out to be true.
Perspective note on Q3 GDP Data by Ms. Madhavi Arora, Lead Economist, Emkay Global Financial Services.
“The weaker growth in 3QFY22 reflected kicking in of high base effects kick in and consolidation of activity. Growth was slower in mining and manufacturing, partly owing to supply chain disruptions, led by auto sector while sequential easing in corporate profitability also was reflecting a weaker quarter. Services led the 3Q growth, again helped majorly by government spending. The sub 9% GDP growth in FY22 revised estimates partly also captures past revisions. The economic recovery might see a minor bump down in 4QFY22 led by mild omicron wave, while the current geopolitical escalation may lead to potential global energy trade and price disruptions and weigh on growth. We assume the energy supply shock may resolve in coming months and likely will not leave a lasting mark on the global and domestic expansion. However, it would clearly have a near term negative impact. Going ahead, Fiscal and monetary support continue to nurture growth, especially a s recovery in domestic economic activity is yet to be broad-based.”
Perspective on Q3 GDP Data by Mr. Vikash Khandelwal, CEO, Eqaro Guarantees (A Surety Solutions provider).
“ The Q3 GDP growth rate falling is a surprise development. The effects of the pandemic are fast fading and growth was expected to pick up the pace. Q3 was also the quarter of the festive season, so high consumption normally pushes up the demand. Negative growth in construction space is worrying, despite heavy public spending by the government. The slowdown in the growth rate reflects the absence of private spending. A rise in inflation and energy prices will likely put pressure and pull down the full-year growth rate.
The slowdown in the growth may force the government to rethink the heavy Capex expenditure planned in the Budget for FY23. A falling growth will also have a bearing on the revenue collection for the government. A sustained pick-up in economic activities, crude price staying in a range and a good monsoon year are required to get the growth rate back on track.”
