What the Q3 GDP numbers convey: 10 key takeaways

The major reason behind lowering the projection is due to an upward revision in the GDP print for FY21. The economy contracted by 6.6 per cent in the previous fiscal as compared to the earlier figure of 7.3 per cent.

Here are the key takeaways from today’s GDP print:

1. India’s economy will grow at 8.9 per cent for the current fiscal, lower than the earlier estimate of 9.2 per cent on account of an upward revision in the previous years GDP numbers. The slower pace of contraction in FY21 than earlier estimated moderated current year’s growth because of a less favourable base effect.

2. Investments as shown by the Gross Fixed Capital Formation or GFCF for Q3 of FY22 stood at Rs 11,50,761 cr from Rs 11,28,117 cr in the same period last year showing a growth of 2 per cent. The tepid growth in investment despite benign interest rates shows that the heavy lifting will have to be done by the government to hasten the recovery process.

3. The silver lining is the pick up in private consumption numbers which constitutes the biggest chunk of the GDP. It grew by 7% in the October-December quarter of FY22 over the same period last year. When compared with the pre-pandemic year, the growth is 7.6 per cent.

4. The Construction sector saw a slow down in the third quarter as it contracted by 2.8 per cent. When compared to the pre-pandemic level the construction GVA was higher.

5. The contact-intensive sector as depicted by the trade, hotels, transport and communications grew by 6.1 per cent in the third quarter, down from a growth of over 9 per cent in the second quarter. The expansion is still below the pre-pandemic figures showing that the contact-intensive sector is still not fully out of the woods.

6. Manufacturing slowed to 0.2 per cent from 5.6 per cent growth in the previous quarter. The slowdown in industrial recovery is a cause of concern as the supply bottlenecks took a toll on electronics and auto production.

7. The growth estimate of 8.9 per cent in the current fiscal despite Q3 growth slowing to 5.4 per cent as compared to estimates of 6% for the quarter show that the NSO is quite optimistic about the growth prospects in the last quarter.

8. The fourth quarter of the current fiscal will witness the impact of restrictions put in place to curb the third wave of the COVID led by the Omicron variant.

9. The geopolitical tensions fueled by Russia’s military operations in Ukraine will have an adverse impact on the domestic economy as it will push up local fuel prices on the back of global crude oil crossing $100 a barrel after eight years.

10. The pick up in private consumption is a positive for the economy but how sustainable will that be in the wake of the Omicron wave and rising inflation will put the spotlight on the fourth quarter. The numbers will be released on May 31.