Crowds are seen shopping during a weekly market in Kandivali.
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India is expected to see double-digit growth in the three months to June – but economists warn that the data does not give the full picture of the country’s growth path.
South Asia’s largest economy on Monday released fourth quarter GDP data showing 1.6% year-over-year growth, mainly driven by government spending and manufacturing growth. For the year as a whole, GDP is expected to decline by 7.3%, compared to growth of 4% in the previous year.
India has been battling a devastating second wave of the coronavirus since February, which accelerated in April and peaked in early May. The infection forced most of India’s developed nations to take localized lockdown measures to slow the spread of the virus.
“With the existing locks, we assume that the economy will tend to slow down in the future,” said Madan Sabnavis, chief economist at Care Ratings, on CNBC’s “Street Signs Asia” on Tuesday.
“The numbers we get for the first quarter of fiscal 2022 – the quarter that ends in June – can be very misleading,” he said. India’s fiscal year starts in April and ends in March of the following year.
On a (a) sequential basis we will see a double digit decrease in seasonally adjusted data, but you will see strong double digit growth year over year.
In the April-June quarter of last year, the economy contracted 23.9% when a month-long national lockdown hit the country. Economists argue that the reported prior-year figure is likely to show double-digit growth for the current quarter, but the strong figure is due to the low base from last year’s negative pressure.
“On a (a) sequential basis we will see a double-digit decline in seasonally adjusted data, but you will see strong double-digit growth year-over-year,” Radhika Rao, an economist with DBS Group in Singapore, told Squawk Box Asia on Tuesday from CNBC.
“That’s because it was down 24% at the same time last year,” she added.
However, experts agree that the economic impact of the second wave may not be as severe as it was last year. India has so far avoided another national lockdown, allowing states to implement local shutdowns instead. Economists agree that the country is generally on track to revive growth, but with a delay.
The data likely shows that consumption sequentially lost momentum this quarter due to the second wave as households had to prioritize their hospital and medical expenses, Rao said.
“So domestic demand, which is the main component of growth, is not going to look that good. There are also high-contact services, most of which have been closed, “she said, adding,” Now only until June, some states are starting to talk about reopening. But it is certainly a very staggered and very unpredictable path in terms of lifting the restrictions. “
Many economists have trimmed their full fiscal 2022 growth projections for India. Goldman Sachs, for example, cut its forecast for real GDP growth for the full year from 11.1% to 9.9%.