India's GDP Grew 8.7% in FY22: How Will It Impact The Economy Further?

The GDP growth in India has been recorded at 8.7% in FY22, which is the highest since 2000, because of the low base effect during the pandemic. India had to face negative growth of 6.6% in the last fiscal because of the pandemic, manufacturing, industry, supply chain had only survived the challenges. Additionally, in March, GDP increased by 4.1%. In the last fiscal, same quarter, GDP shrunk by 1.6%.

However, the Ministry of Statistics and Programme Implementation (MoSPI) expected the GDP to grow 8.9% YoY.

According to the recently published data, the Manufacturing grew 9.9%, Mining & Quarrying grew 11.5%, Construction grew 11.5%, Trade, Hotels, Transport, Communication & Services related to Broadcasting grew 11.1% and Public Administration, Defence & Other Services grew by 12.6%.

The question is how is this growth going to impact the economy? To answer this, one needs to analyze the country's economy closely. The Indian government is trying hard to recover from the high inflationary pressure now. The RBI has already hiked the repo rate, to control it. This GDP growth will give the country's officials confidence in the developments. The high prices were influenced by rising crude oil prices and supply chain bottlenecks. The manufacturing sector was also declining. This growth will encourage the government to move forward toward new investment in manufacturing and infrastructure, along with agriculture. The repo rate hike is important for India at present, but the government must focus on generating more employment scopes to further develop the economy. Otherwise, the demands will not improve in India, even if the manufacturing sector grows sharply. Prices for basic needs, including food should be the government's major focus.

Commenting on the published GDP data, Garima Kapoor, Economist, Elara Capital told the media, "Going forward, while the continued normalization of contact-based service sector, revival in private Capex on the back of PLI schemes and 'China plus 1' strategy, government's continued focus on Capex and improved rural consumption owing to higher realizations in cultivation income will act as tailwinds, slowdown in global growth, elevated energy prices, rising interest rate cycle and tightening of financial conditions will be key headwinds. Amid expectation of elevated energy prices through FY23E, we pare down our FY23E GDP growth expectation at 7.5% revised down from 7.8%."