India Q1 GDP growth likely surged but the devil is in the details

economic growth

Indian Market
by 5paisa Research Team Last Updated: Dec 10, 2022 - 04:59 am 17.4k Views

India’s economy may have grown by a stellar 15.2% in the April-June quarter, according to a poll of analysts. But the poll also says that such a high growth number is potentially misleading.

The significantly high year-on-year growth number is due to a weak base effect last year and a rebound in consumption as Covid-19 pandemic restrictions eased, according to the poll by Reuters.

To be sure, large parts of India were deeply affected in the April-June period of 2021 due to the devastating second wave of the pandemic.

Still, the growth estimate is significant because the GDP was earlier expected to expand in the range of 4.1%, on a year-on-year basis.

In fact, if realised, growth would be the fastest in a year, but slightly weaker than the Reserve Bank of India's forecast of 16.2%.

On what is the GDP forecast based?

The growth estimate is the median forecast from an Aug. 22-26 Reuters poll of 51 economists.

What did the economists actually forecast? Was there a broad consensus?

Reuters said that the forecasts ranged widely, from 9.0% to 21.5%. But most economists said any blowout growth figure would be mostly down to it coming off a low base caused by the impact of the COVID-19 delta variant on economic activity.

But is this double-digit growth number likely to hold during the subsequent quarters?

Not really. The Reuters poll expects the economy to slow considerably to 6.2%, 4.5% and 4.2% in the current and following quarters, highlighting a below-potential growth trajectory for the second-most populous country in the world.

How do these numbers compare with those of other countries?

When China and the rest of the world are grappling with economic challenges, India stands out as one of the better performing economies. Still, it has not created enough jobs to keep up with the large numbers of young people entering the workforce.

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