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    India's economy grows 20.1% in Q1; here's what experts make of the reading

    India's economy grows 20.1% in Q1; here's what experts make of the reading

    India's economy grows 20.1% in Q1; here's what experts make of the reading
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    By CNBCTV18.com  IST (Published)

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    SUMMARY

    Indian economy clocked a growth of 20.1 percent in the first quarter of FY22, as compared to a contraction of 24.4 percent recorded in the corresponding quarter of the previous year. However, the economic activity remains well below the pre-pandemic levels due to the second wave of coronavirus outbreaks. Here's what economists and statisticians make out of these numbers.

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    Pronab Sen, Former Chief Statistician: The numbers that have come in are a lot better than any of us had been expecting. I was expecting around 16 percent and what this suggests is the second wave in terms of the pandemic was much worse than the first wave. But the fact that there wasn’t a nationwide lockdown seems to have helped the economy alone. What this is saying is the effect of the pandemic on the economy through its various channels is a lot less than the reaction we had to the pandemic. So this is a piece of good news and what it is saying is last year we overreacted.

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    Sonal Varma, MD and Chief Economist for India and Asia at Nomura Financial: 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 the COVID-19 quarter. We were expecting 4-4.5 percent of a drop, so it falls much more than what we had expected. We were surprised that despite the government CAPEX going up, the fixed 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 has 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.

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    Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India (SBI): The GDP numbers, which came in yesterday were mostly in line with our expectations. We never expected a double-digit expansion from the beginning. 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.

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    Anubhuti Sahay, Head of South Asia Economic Research (India) at Standard Chartered Bank: GDP has come pretty close to our estimate of 21 percent. It is slightly lower when it comes to the GVA number. We were looking at GVA number of close to 20 percent but it has come at 18 percent. And that shows that the non-farm sector has not done as well as we expected. Farm sector growth at 4.5 percent has surprised us, we were looking at a growth of 3-3.5 percent. However, the contact intensive sectors, especially the services sector was much more impacted than the industry growth is clear in this number.

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    Abhishek Upadhyay, Senior Economist at ICICI Securities: Despite the modest negative surprise, our gross value added (GVA) number was about 2 percentage points higher. We still remain cautiously optimistic, we think that there is still scope for growth to surprise higher than what we had initially pencilled in. We estimate full-year GDP growth will be 9.5 percent.

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    Sudipto Mundle, Acting Chairman of National Statistical Commission: 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, the government is not driving growth, trade is not driving growth because even the exports are growing, so it is the 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.

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    DK Joshi, Chief Economist of CRISIL: GDP has come as per our expectation. We were expecting a 19 percent growth in GDP with a slight positive bias. The biggest driver of this growth is the base effect, there is no doubt about that. The Second learning is the second wave was very virulent as far as the healthcare system is concerned but the economy was not that badly impacted. So there is underlying learning to live with the virus phenomenon which seems to be playing out and which will play out in the rest of this fiscal as well.

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    Sameer Narang, Chief Economist at Bank of Baroda said, “We were anticipating a 20 percent kind of increase in the private final consumption expenditure. Even the government side as well given the multitude of lockdowns by different state governments, we did expect that the government spending on the revenues account would be far lower. However what we see is that the government spending ties in quite well with the overall construction spending and that is where the majority of growth is also likely to come in the coming few quarters and years – where the government is actually looking at both monetisation as well as spending a lot in terms of building high-quality roads, improving the rail network. So all of those principal investments that are being tied up for infrastructure will be a key driver of growth in the coming quarters and years.

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