India’s GDP Grows 8.7% in FY 2022

India’s GDP grew 8.7% in FY 2022 after contracting 6.6% during the previous fiscal. We break down the real and nominal GDP data and real GVA for FY ’22 to assess current pressure points in the Indian economy.

The Ministry of Statistics and Programme Implementation recently released a press note for the Provisional Estimates (PE) of National Income (Gross Domestic Product – GDP) for the financial year (FY) 2022.

These estimates, which peg India’s GDP at 8.7 percent for FY 2022, are compiled using the benchmark-indicator method, with FY 2021 being the benchmark year (FY 2020-21). The data from the benchmark year is extrapolated using the relevant indicators reflecting the performance of sectors.

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Along with annual GDP, the estimates for fourth quarter (Q4 – January-March) FY 2022 have also been released, which indicate a slowdown during the period, in the wake of Omicron variant of COVID-19 and the resultant curbs. Aditi Nayar, chief economist at consultancy ICRA, said the slowdown seen in India’s GDP growth to a four quarter low in the January-March period of 2021-22 was a result of the adverse impact of the third wave on contact services, and of high commodity prices on margins, as well as the unfavorable base effect.

According to V. Anantha Nageswaran, India’s Chief Economic Advisor, the Indian economy consolidated its recovery in FY 2022, with most constituents surpassing pre-pandemic level of activity. A positive trend in the high frequency indicators of growth during the first two months of Q1 FY 2023 also indicate continued expansion of economic activity.

What are the GDP estimates for India in FY 2022?

• Real GDP in FY 2022: According to the data, the growth in GDP at constant prices (2011-12), also known as real GDP, during FY 2022 is estimated to attain a level of INR 147.36 trillion (US$1.90 trillion), as against the First Revised Estimate of INR 135.58 trillion (US$1.75 trillion) for FY 2021. The growth in GDP during FY 2022 is estimated at 8.7 percent. It must be noted that this expansion comes against the backdrop of a very low base as the economy contracted by 6.6 percent in the previous fiscal due to the impact of strict anti-COVID pandemic restrictions and measures. The second revised GDP estimates, released in February this year, had projected India’s economy to grow by 8.9 percent in FY 2022. At the same time, the Economic Survey 2022 had estimated the GDP growth for the current fiscal (FY 2023) to be in the range of 8-8.5 percent.
• Nominal GDP in FY 2022: The growth in GDP at current prices, also known as nominal GDP, during FY 2022 is estimated at 19.5 percent. For FY 2022, India’s GDP at current prices is estimated to attain a level of INR 236.65 trillion (US$3.05 trillion), marking a significant leap from FY 2021, when the nominal GDP was valued at INR 198.01 trillion (US$2.55).
• Real GDP in Q4 FY 2022: It is estimated at INR 40.78 trillion (US$525.49 billion), as against INR 39.18 trillion (US$504.87 billion) in Q4 2020-21, showing a growth of 4.1 percent. Factors like a spike in retail inflation, surge in energy and commodity prices following the Russia-Ukraine conflict, Omicron induced curbs, global spill overs of supply shortages, crude oil shock, and higher input costs have thwarted India’s growth momentum in Q4 of FY 2022.

How have different sectors performed in India during FY 2022?

Manufacturing in India grew by 9.9 percent against a contraction of 0.6 percent. However, in Q4 as supply chain blockages impeded manufacturing, it contracted by 0.2 percent, thereby, pulling down overall GDP growth. Construction showed a growth of 11.5 percent against a contraction 7.3 percent in the previous fiscal.

Contact-intensive sectors like trade, hotels, and transport grew 11.1 percent compared to a contraction of 20 percent.

The services sector had earlier suffered a major blow in FY 2021 due to pandemic-related restrictions.

The agriculture sector, on the contrary, slowed to three percent in FY 2022, as compared to a growth of 3.3 percent in the previous fiscal. Concerns around early and excessive heatwaves in March 2022, export bans by key global producers, shortage of raw materials, and supply-side disruptions are key factors that adversely hit the sector during Q4 FY 2022.

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