The slowdown seen in India’s GDP growth to a four-quarter low of 4.1 per cent in January-March period of 2021-22 was mainly on account of impact of the third Covid wave and high commodity prices, opined experts.

Indian economy grew at its slowest pace in a year during January-March, pulling down the Gross Domestic Product (GDP) growth in the full year to March to 8.7 per cent before Russia’s invasion of Ukraine added a new inflation hurdle to the recovery.

The GDP expanded by 4.1 per cent in the final quarter of the 2021-22 fiscal year, according to data released by the National Statistical Office.

This was lower than the 4.8 per cent growth the Chinese economy saw in the quarter.

“Provisional estimates of real GDP in financial year 2021-22 exceeds the pre-pandemic 2019-20 levels to now establish full economic recovery,” said chief economic adviser V Anantha Nageswaran at a press conference.

Aditi Nayar, chief economist, ICRA, said the slowdown seen in India’s GDP growth to a four-quarter low in January-March period of 2021-22 was inevitable, stemming from the adverse impact of the third wave on contact services, and of high commodity prices on margins, as well as the unfavourable base effect.

“Unsurprisingly, the services sector was the main driver of the 3.9 per cent GVA growth in fourth quarter of FY2022,” she said.

Boosted by government spending, Public Administration, Defence and Other Services (PADOS) stood out as the fastest growing sub-sector of GVA (Gross Value Added) in January-March quarter of last fiscal, Nayar added.

Rumki Majumdar, economist, Deloitte India, said, the difference between the real and nominal GDP suggests that inflation has been a persistent problem, and the economy has been fighting the challenge of rising prices for a long time now.

“Higher prices weighed on consumer wallets and production costs. Panic and the search for safer havens amongst global investors led to capital outflows from emerging countries, India being one. This resulted in currency depreciation and higher import bills,” Majumdar said.

Ramesh Nair, CEO, India & MD, Market Development, Asia, Colliers, said, India’s GDP grew by 8.7 per cent in 2021-22, staging a major comeback after a deceleration of 6.6 per cent in the previous fiscal.

“This clearly indicates that the economy is out of the woods from the effects of pandemic and is on its path to recovery. Both housing and office demand have a very high correlation to GDP, even if pricing cycles are dependent on demand and supply dynamics,” he said.

D K Srivastava, chief policy advisor, EY India, said the NSO numbers confirm that all GDP segments have emerged higher than their pre-Covid magnitudes.

“Going forward, in 2022-23, the Implicit Price Deflator (IPD)-based inflation may remain high given the current inflationary trends. With the expectation of nominal GDP growth in FY23 being significantly above the real GDP growth, the Centre may garner tangibly higher tax revenues compared to the budget estimates,” Srivastava added.

According to experts, the outlook for the current fiscal year remains clouded as global crude oil prices have hardened back to USD 120 per barrel after increased sanctions on Russian oil.

Momentum in the services sector will be one of the key drivers apart from the government’s focus on enhancing public capital expenditure.

High inflation had led to the Reserve Bank raising the benchmark interest rate by 40 basis points in an unscheduled review. It is expected to take similar measures when the Monetary Policy Committee meets for the bimonthly review on June 8.

Government’s chief economic adviser Nageswaran ruled out the risk of stagflation in India as the country is better placed than other nations.

Stagflationary risk to India is quite low compared to other countries, he said.

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