Prof Mithilesh Kumar Sinha
Department of Economics, NU Lumami
India, Asia’s third-largest economy has now posted the fifth consecutive positive growth, driven by the festive season boost to consumer demand, policy support, and rapid fall in coronavirus cases. Though India’s economy lost momentum in the final quarter of 2021, with growth slowing from previous two quarters. India’s Gross Domestic Product (GDP) rose 5.4% year-on-year in October-December, 2021 compared with growth of 8.4 per cent in the previous quarter according to the data released by the National Statistical Office (NSO).
The downside was a drag in manufacturing output and some impact of omicron variant in contact-intensive sectors.The pace of growth of Indian economy slowed in October-December period as compared to previous quarter (July-September) on account of falling in growth of sectors like agriculture, mining, manufacturing, transport and construction, steadily rising retail inflation and investment during the period under review.
According to NSO data, Gross Value Added (GVA) growth in the manufacturing sector growth remained almost flat at 0.2 per cent in the third quarter of 2021-22, compared to a growth 8.4 per cent a year ago.Farm sector GVA growth was slow at 2.6% in the third quarter compared to 4.1% growth a year ago. Construction sector GVA declined by 2.8% as against a growth of 6.6% a year ago. Mining sector grew by 8.8%, as against a contraction of 5.3%. Electricity, gas, water supply and other utility services segment posted a growth of 3.7% in the third quarter of this fiscal year, against 1.5% expansion a year ago.Similarly, trade, hotel, transport, communication and services related to broadcasting grew by 6.1% compared to 10.1% contraction a year ago. Financial, real estate and professional services growth stood at 4.6% in Q3 FY22 compared to a growth of 10.3%. Public administration, defence and other services grew at 16.8% during the quarter under review compared to 2.9% contraction a year earlier.
One of the downsides of slow growth is the consequential fiscal squeeze, hampering public investment-led recovery and enhanced income support for the jobless.The real problem is a perception of stagnation, which is partly driven by the abnormally high expectations aroused around India’s “fast growing” economy.
Despite a lower growth rate, India's GDP grows 5.4 pc in Q3 remains world's fastest growing major economy and economists say economic momentum strengthened by the end of 2021.
The disappointing data put a question mark on the narrative that the Indian economy was back on track after the COVID-19-induced derailment. The 8.4 per cent growth in July-September 2021 was on the back of a 7.4 per cent contraction in the same period in 2020. Lockdowns — countrywide and regional — have thrown many out of jobs, forced enterprises to shutter down and siphoned off liquidity. All this were expected to curb purchasing power and economists have been arguing for more government spending.
