Commodity cost pressure, as well as high base effect, subdued India’s Q3FY22 GDP growth rate on a sequential basis, thereby, lowering the 2021-22 growth forecast to 8.9 percent.

Besides, a marginal rise in manufacturing and a contraction in construction activity flattened outgrowth in Q3FY22.

National Statistical Office (NSO) data showed that India’s Q3FY22 GDP growth rate stood to 5.4 percent on a year-on-year basis.

The Q3FY22 GDP, at constant prices of 2011-12, is estimated at Rs 38.22 lakh crore, as against Rs 36.26 lakh crore during the corresponding period of 2020-21. On a YoY basis, India’s GDP growth rate had inched up by 0.7 percent during the corresponding period of the previous fiscal.

However, on a sequential basis, the GDP growth rate during Q3FY22 was slower than the rise of 8.5 percent recorded for Q2FY22 and 20.3 percent in Q1FY22.

Further, the data estimated a rise in GVA at Basic Prices at constant (2011-12) prices in Q3 2021-22 to Rs 35.26 lakh crore, as against Rs 33.66 lakh crore in Q3 2020-21, showing a growth of 4.7 percent. The GVA includes taxes but excludes subsidies.

On a year-on basis, there was a sharp increase in GVA of public administration, defense, and other services, which recorded a growth of 16.8 percent from (-)2.9 percent in the like quarter of the previous fiscal and 19.5 percent in Q2FY22.

The Q2 GVA for 2021-22 from the agriculture, forestry, and fishing sector showed a growth of 2.6 percent, as against 4.1 percent in the corresponding quarter of 2020-21 and 3.7 percent in Q2FY22.

Similarly, the GVA in Q2FY22 from the manufacturing sector grew by 0.2 percent, as compared to a growth of 8.4 percent in the like quarter of the previous fiscal and 5.6 percent in Q2FY22.

The mining and quarrying sector increased by 8.8 percent against the previous fiscal’s contraction of (-)5.3 percent and 14.2 percent in Q2FY22.

“The quarterly GDP growth numbers of FY22 is heavily influenced by the base effect, yet it indicates that the recovery in 3QFY22 can yet now be called a robust recovery,” said Sunil Kumar Sinha, Principal Economist, India Ratings and Research.

“Several indicators used in the estimation of 3QFY22 GDP such as consumption of steel, sale of commercial or passenger vehicles, cargo handled at seaports are either showing negative or low growth despite the extraordinary low base of FY21. The situation is unlikely to be very different even in 4QFY22 due to the third wave of Covid.”

Furthermore, the lower than expected print for Q3FY22 along with the revision in growth for Q1-Q2FY22 led to a lowering of the FY22 GDP growth forecast to 8.9 percent from an initial estimate of 9.2 percent.

In 2020-21, India’s economy had contracted by 6.6 percent.

On Monday, the ‘Second Advance Estimates of National Income for the financial year 2021-22’, which were released along with the quarterly numbers estimated that ‘Real GDP’ or ‘GDP at Constant Prices’ (2011-12) in the year 2021-22 will rise to Rs 147.72 lakh crore from the ‘First Revised Estimate of GDP’ for 2020-21 at Rs 135.58 lakh crore.

As per the estimate, real GVA at basic prices is estimated at Rs 136.25 lakh crore in 2021-22, as against Rs 125.85 lakh crore in 2020-21, showing a growth of 8.3 percent. In terms of sectors, the estimates showed growth from agriculture, forestry, fishing, mining, quarrying, manufacturing, and construction at 3.3 percent, 12.6 percent, 10.5 percent, and 10 percent, respectively.

The GVA at basic prices for 2021-22 from the electricity, gas, water supply, and other utility services sector is expected to grow by 7.8 percent.

In addition, the GVA from trade, hotels, transport, communication, and services related to broadcasting, financial, real estate and professional services, and public administration, defense, and other services grew at 11.6 percent, 4.3 percent, and 12.5 percent, respectively.

“The growth estimates for the full fiscal are broadly in line with expectations. However, to achieve 8.9 per cent growth, the Q4 GDP has to grow by 4.8 per cent. This looks challenging given the fact that the third wave of the pandemic had caused considerable restrictions,” said M. Govinda Rao, Chief Economic Adviser at Brickwork Ratings.

“In addition, the ongoing geopolitical tensions, persistent supply bottlenecks, coal, power, and semiconductor shortages too have been pronounced. The effect of semiconductor shortages is already evident in the weak 0.2 percent growth in the manufacturing sector in Q3.”

He also said that the third wave largely impacted the economic activities in the fourth quarter.”We expect the full fiscal growth may undergo revisions. Finally, the higher crude oil prices are also likely to adversely impact both growth and inflation.