India GDP 2022: Indian Economy Grew 4.1% In Q4 As Omicron Wave Hit

The Indian economy slowed in the January-March quarter of 2022, as the third wave of the Covid-19 pandemic disrupted activity again.

GDP growth in Q4 FY22 was at 4.1% year-on-year, compared to a revised growth of 5.4% for Q3 FY22, according to data released by the government.

Gross Value Added, which strips out the impact of subsidies and indirect taxes, grew 3.9% year-on-year in the fourth quarter, compared with a revised growth of 4.7% for Q3 FY22.

Growth was a tad stronger than expected. A Bloomberg poll of economists had estimated fourth quarter GDP growth at 3.9% and GVA at 3.5%.

For the full fiscal year, GDP grew 8.7% year-on-year, compared to a contraction of 6.6% in FY21. GVA for FY22 grew 8.1% year-on-year, compared to a contraction of 4.8% in FY21.

While the readings have broadly come In line with expectations, outlook remains clouded with uncertainties especially with escalating crude oil prices, said Upasna Bhardwaj, senior economist, Kotak Mahindra Bank. Weak labour markets, limited room for additional fiscal spends, reduced corporate margins due to rising input prices and weaker global demand remain a concern, she said.

Sectoral Trends

• The agriculture sector grew 4.1% in fourth quarter compared with 2.5% in third quarter. The sector grew 3% for the full year.

• The mining sector grew 6.7% in fourth quarter compared with a rise of 9.2% in the previous three months. Mining activity rose by 11.5% annually.

• Manufacturing contracted 0.2% in fourth quarter against a 0.3% growth in the previous three-month period. For the full year, the sector rose by 9.9%.

• Construction grew 2% versus a contraction of 2.8% in the preceding quarter. The sector grew 11.5% for the full year.

• Trade, hotel, transport, communication grew 5.3% in fourth quarter compared with 6.3% in the previous quarter. For the full year, it grew by 11.1%.

• The financial services sector grew 4.3% compared with 4.2% in the previous quarter. For the full year, the sector grew by 4.2%.

The services sector was the main driver of the 3.9% GVA growth in Q4 FY22, said Aditi Nayar, chief economist at ICRA. Boosted by government spending, public administration, defence and other services stood out as the fastest growing sub-sector, she said. Excluding this segment, GVA growth stood at a muted 3.3% in Q4, according to Nayar.

Expenditure Trends

Expenditure trends show the strongest growth in government consumption expenditure.

• Private consumption, reflected in private final consumption expenditure, rose 1.7% in fourth quarter over a year earlier compared with 7.4% in the third quarter.

• Investments, as reflected by gross fixed capital formation, rose 5.1% year-on-year in fourth quarter, compared to 2.1% in the third quarter.

• Government final consumption expenditure rose 4.8% year-on-year in fourth quarter, compared to a rise of 3% in the third quarter.

"The subdued growth of private final consumption expenditure in Q4 FY22 reflects both a high base and the impact of the third wave of Covid-19 in January-February 2022," said Nayar. "However, the moderate growth of 4.8% and 5.1%, respectively, in government final consumption expenditure and gross fixed capital formation boosted the GDP performance in Q4 FY22."

With pandemic restrictions lifted, consumption could pick up, said Rajani Sinha, chief economist at CareEdge. "Consumption spending could see an improvement as the employment situation in the economy improves. However, high food and fuel inflation will be a dampener for discretionary spending," she said.

On the investment front, the government’s strong capex plan will provide a boost to growth, Sinha added. While the private sector's intent to invest is showing up in new investment projects announced, the sharp rise in commodity prices and prevailing economic uncertainties could weigh on the pick-up in private investment cycle, she said.