India's total output has grown by 20 percent over last year lockdown quarter; but the economy is still 10 percent smaller than what it was in Q1 of 2019 that is the pre-COVID Q1.Now, sectorally – agriculture allied products have grown steadily at 4.5 percent growth over last year and 4 percent compounded annual growth over 2 years.Manufacturing is up 50 percent over the year but it was more than 50 percent down last year so over two years, it is 2 percent degrowth.Services is the worst affected - 34 percent growth since last year but it has been contracting by 5 percent annually since 2019.Also Read: Q1 GDP strong, but not strong enough to catapult economy to pre-COVID-19 levelsWhat helped growth - consumption or capex? Private final consumption expenditure was up 19.3 percent over last year, in line with gross domestic product (GDP), so not growing faster than GDP.Consumption is slowing at 6 percent annually since 2019. Government has spent 4.8 percent less but over two years its expenditure is up 3 percent annually. Capex is up a strong 55 percent year on year (YoY); but still falling at 8 percent pace over two years. Exports is the best performer, it has grown by 39 percent over last year and with a 2-year growth of 4 percent.The biggest let down is government expenditure - the April-July fiscal data, that was announced on Tuesday shows that taxes have grown very well by 160 percent YoY and by 75 percent each year over the past 2 years.But govt spending is down 4.8 percent over last year and up only 3 percent over a two-year period.Sonal Varma, MD and Chief Economist for India and Asia at Nomura Financial, Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India (SBI), Abhishek Upadhyay, Senior Economist at ICICI Securities PD and Sudipto Mundle, Acting Chairman of National Statistical Commission discussed this further.Sudipto Mundle is also a distinguished fellow at the National Council of Applied Economic Research.“Looking over two years ago is one way to look at the numbers. The seasonally adjusted momentum is something that we focus on and our estimates on seasonally adjusted quarter on quarter (QoQ) GDP was down about 6.5 percent during the second wave of COVID-19 quarter. We were expecting 4-4.5 percent of a drop, so it falls much more than what we had expected,” said Varma.“We were surprised that despite the government capex going up, the fix investment overall went down more and more than what private consumption went down with. So, there could be a number of reasons for this, maybe state governments are spending less, it is possible the private informal side delays in capex have been a lot more. So that was one disappointment. The second disappointment is on government spending. We have lowered our growth number to 9.2 percent for the financial year from 10.4 percent,” she added.Also Read: National Monetisation Plan: Not a sellout, but fineprint, implementation key to success“The GDP numbers, which came in yesterday was mostly in line with our expectations. We never expected a double-digit expansion from the beginning. It was mostly in-line with the expectations. Some of the numbers in the figures are striking – the expansion in the nominal GDP number has grown staggeringly at 31.7 percent. Some of the sectors like mining, construction has shown a 40 percent increase in the deflator that means that there are significant inflationary pressures in the economy, which could be one of the reasons which could have a negative impact on growth going forward,” said Ghosh.Abhishek Upadhyay still remains cautiously optimistic. “Overall, despite the modest negative surprise, our gross value added (GVA) number was about 2 percentage points higher. We still remain cautiously optimistic and think that there is still scope for growth to surprise higher than what we had initially penciled in – we thought full year GDP growth will be 9.5 percent,” he said.Also Read: 20.1% surge in GDP growth helped by low base, economy yet to recover fully: Chidambaram“Imports have grown even faster than exports, which presumably reflects the recovery but as a result, the balance of trend has expanded. So, of the various engines of growth, government is not driving growth, trade is not driving growth because even the exports are growing, so it is an investment that is driving growth. I am one of those old conservative types who think that the sense of causality - it is income that drives consumption and not the other way round whereas the autonomous drivers of growth are government, investment and trade of which right now we are flying on one engine namely investment,” Sudipto Mundle mentioned.For the entire discussion, watch the accompanying video.Catch all live market action here.