April-June GDP seen ‘deceptively high’ level of 20 per cent: ICRA

ICRA said that the low base of last year, when the GDP had contracted by close to 24%, conceals the impact of the second wave of Covid-19 infections.

“The double-digit expansion expected in YoY terms in the first quarter is deceptively high, as it benefits inordinately from last year’s contracted base,” said ICRA chief economist Aditi Nayar.

As per the report, economic activity is boosted by robust government capital expenditure, merchandise exports and demand from the farm sector. The gross value added (GVA) is likely to have grown 17% in the and estimated to contract 15% when compared to the preceding March quarter, which shows the impact of the second wave.

The company forecasts Gross Value Added and the GDP to have shrunk by around 9% each in the quarter relative to the pre-Covid level of Q1FY20, highlighting the tangible distress being experienced by economic agents in the less formal and contact-intensive sectors.

ICRA cautioned that the organised sector is expected to have gained at the cost of the less formal space during this period.

“The available statistics are often unable to capture the pain experienced by the latter, which may result in an overestimation of growth under the present circumstances,” it added.

The Reserve Bank of India expects the GDP to expand 21.4% in the quarter.

Nayar said based on its assessment of volumes and available earnings, it is forecasting a GVA expansion in industry at a considerable 37.5%, led by construction and manufacturing, which experienced significantly less curbs in the just-concluded quarter compared to the situation during last year’s stringent nationwide lockdown.

Construction activity benefitted from the healthy Central and the state government capex spending in Q1 FY2022, which exceeded even the pre-Covid levels of Q1 FY20, she said.

It expects GVA in the services sector to post a relatively lower expansion of 12.7% in and that in agriculture, forestry and fishing at 3%, benefitting from the healthy rabi harvest despite the higher incidence of Covid-19 cases in rural India in the second wave as healthy crop output and procurement and higher minimum support prices appear to have buffered the farm sector’s demand during this challenging period.