Indian Government Lowers GDP Estimates For Current Fiscal To 8.9%

The union government of India has lowered the GDP estimate for the current fiscal year to 8.9% (in the second advance estimates), from the earlier estimate of 9.2% (in the first advance estimate). According to previous reports, the country's GDP grew 20.3% in the Q2 of this fiscal. However, it came because of the low base effects of the Covid pandemic. Later, in Q2, GDP grew 8.5%. On the other hand, the nominal GDP during 2021-22 is estimated to have a growth rate of 19.4%, showing a sharp gain in wholesale inflation.

After multiple lockdowns and restrictions across the state, the economy is now growing moderately. Supply chain disruptions and inflation stood as two major reasons for the slowdown. India's industrial output has also slowed down sharply. According to the latest published report, India's economy grew 5.4% in the October-December period compared to the previous quarter's growth of 8.4%. The National Statistical Office (NSO), on behalf of the union government stated that GDP had increased 0.7% in the corresponding period of 2020-21, according to the data released by the National Statistical Office (NSO).

Significantly, in Q3, the agriculture sector increased 2.6% compared to 3.7% in Q2. Similarly, the mining sector increased 8.8% compared to 14.2% in Q2. And, the manufacturing sector increased only 0.2% compared to 5.6% in Q2.

Commenting on the slowdown in growth rate, earlier, Brickwork Ratings stated, "Although the impact of the third wave on economic activities may be limited compared to the first and second waves, there is some loss of momentum to revival. Persistent supply-side bottlenecks, steadily rising international crude oil prices, and increasing raw material costs have added to the woes. Hence, the growth rates in Q3 and Q4 may be lower than projected earlier. After having witnessed 20.1% and 8.4% growth in Q1 and Q2, respectively, we expect the Q3 GDP may come in lower at 5.8%."