GDP growth may be overestimated at 20% in first quarter, says Icra

Rating agency Icra said on Wednesday that economic growth may be overestimated at 20 per cent for the first quarter of the current financial year when it is released this month-end.

It cautioned that the organised sector is expected to have gained at the cost of the less formal space during the first quarter of the current financial year. The available statistics are often unable to capture the pain experienced by the latter, it said.

“The consumer confidence survey conducted by the RBI serves as a useful proxy for demand from the less formal sectors. Its July 2021 round indicated that the Current Situation Index barely rose to 48.6 from a record low of 48.5 in the May 2021 round, highlighting the continued impact of the loss of income and employment, as well as higher medical expenses experienced by many households as a result of the second wave of Covid-19,” Icra chief economist Aditi Nayar said.

Icra has forecast the year-on-year (YoY) gross value added (GVA) at 17 per cent in Q1FY22, benefitting from healthy Central and state government capital spending, robust merchandise exports and resilient demand from the farm sector.

Regardless, the muted base of last year’s nationwide lockdown has aided in concealing the impact of the second wave of Covid-19.  

Nayar said, “Based on our assessment of volumes and available earnings, we have forecast the GVA expansion in industry at a considerable 37.5 per cent in Q1FY22, 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. In particular, construction activity benefitted from the healthy Central and the state government capex spending in Q1FY22, which exceeded even the pre-Covid levels of Q1FY20.”