The Indian economy grew by a record 20.1 per cent in the first quarter of the current financial year, and came on the back of a massive contraction of 24.4 per cent in the corresponding three months of the previous year.
The growth hides the massive disruption caused by the second Covid wave, as GDP was still 9.2 per cent lower than Q1 of 2019-20 or the pre-Covid period. Besides, the sequential growth during April-June period of FY22 was 16.9 per cent lower than Q4 of the previous financial year, a measure that is one of the most used methods in other countries.
The statistical department concedes this fact and said in a statement, "The growth rates in (Q1), 2021-22 in some cases are unduly high due to the low base."
India was slightly behind the UK in terms of economic growth in this period as the latter's economy rose 22.2 per cent on an annualised basis. Quarter-on-quarter, the UK economy grew by 4.2 per cent.
However, the size of the economy (GDP at current prices) was slightly higher by 2.4 per cent during the first three months of FY22 compared to the same period of FY20. It grew 31.7 per cent on a low base of 22.3 per cent fall in the economy in April-June of 2020-21. This could be due to higher GST collections this time.
The finance ministry says the GDP data indicated economic recovery. "India's economic growth would reach the pre-pandemic levels by next year," chief economic advisor Krishnamurthy Subramanian said.
Independent experts are not as gung-ho though.
Former chief statistician Pronab Sen said the coming quarters may not be as robust as believed.
"The government has made big announcements on spending, but is not showing up in the numbers," he said.
All segments except agriculture and allied activities and electricity and related activities contracted compared to first three months of 2019-20 or pre-Covid level. For instance, despite a massive surge of 49.6 per cent in the first quarter of this financial year, manufacturing (part of industry) was 4.2 per cent down from the same period of FY20.
Similarly, construction activities jumped by 68.3 per cent on the base of 49.5 per cent decline in the first three months of 2020-21. However, it was still down by close to 15 per cent against FY20's first quarter.
Badly hammered trade, hotels, transport sector saw 34.3 per cent surge this time as it had seen 48.1 per cent contraction last time. The segment fell 30.22 per cent compared to first three months of 2019-20.
Similarly financial, real estate and professional services picked up pace as though it grew just 3.7 per cent in April-June this time, but it was down merely 1.5 per cent compared to FY20's first three months.
On the demand side, investment has still not picked up to the pre-Covid level. Though gross fixed capital formation rose by as much as 55.3 per cent in Q1 of the current financial year on a record 46.6 per cent decline a year ago, it was over 17 per cent less than April-June period of 2019-20.
Said Sen, "The recovery we have seen is not thanks to the government, but it is thanks to the private sector. Private investment may taper off in the coming months."
Private final consumption expenditure, denoting demand, was up 19.3 per cent in Q1 of FY22 on a low base of 26.2 per cent contraction. However, it was still close to 12 per cent less than Q1 of FY20
The government's final consumption expenditure declined 4.8 per cent in Q1 of FY22 on 12.7 per cent growth during the same period of the previous year. It was over 7 per cent higher than the first quarter of FY'20.
Sunil Kumar Sinha, principal economist at India Ratings, said the economic recovery will continue to need both fiscal and monetary policy support in the near term to ensure that recovery does not falter.