FIRST ADVANCE ESTIMATE

India's GDP Estimated To Grow At 9.2% In FY22 

    India's economy is expected to grow up to 9.2 % in the financial year 2021-22, ending March 2022, as against 7.3% contraction in FY21, according to first advance estimates released by the Ministry of Statistics and Program me Implementation ( MOSPI). The second advance estimate will be released on 28-February along with the December-21 quarter GDP numbers, which will be closer to the real GDP picture. The first advance estimate is lower than the RBI estimate of 9.5 %, but apparently the first advance estimate has also fractured in negative impulses that could be Omicron in a base case scenario.

    In the last few years, the gross value added (GVA) has emerged as a veritable alternative to GDP to gauge the actual output growth projected for FY22 over FY21 and FY20. Real GDP or GDP at Constant Prices (2011-12) in the year 2021-22 is estimated at ₹147.5 trillion as against the Provisional Estimate of GDP for the year 2020-21 of ₹135.13 trillion, released on 31st May, 2021. Real GVA at Basic Price is estimated at ₹135.22 trillion in 2021-22, as against ₹124.53 trillion in 2021, showing a growth of 8.6 %. Advance estimates are released to provide the numbers to the finance ministry to work on the Budget for the next financial year.

    The ley is to understand what will be the components of the GDP growing to ₹147.54 trillion in FY22 as per first advance estimate. In all the cases, we look at FY22 over FY20 neutralize the pandemic effect. Here are some of the highlights of the GDP components.

(i) Private final consumption has fallen. It is still way below the pre-COVID levels which shows no consumer confidence.

(ii) Government Consumption expenditure has risen in FY22. Government initiated spending has been a key factor in driving GDP growth in FY22 as per the advance estimate.

(iii) Gross Fixed Capital Formation has picked up since pre-CPVID levels, although it is still too small to energize the Capital Cycle. People are diverting a lot of the spending into assets like gold and jewellery in hope of value a creation, something not too productive.

(iii) Merchandise Exports as a sub-set of trade has been a very important driver of GDP in FY22.

(iv) Merchandise Imports have to be correlated with the rise in valuables as a chunk of the trade deficit has arisen from record gold imports in 2021.

    To sum it up, private consumption continues to lag the FY20 levels while govt. spending has tried to fill the gap & gross capital formation (GCF) is marginally in the positive. But the real thrust to GDP growth in FY22 is likely to come from Trade & valuables. The latter is not c from a productive growth prospective.

    An average Indian has lost two years in terms of income levels and three years in terms of spending levels. 

    What's more, even these average numbers do not capture the actual pain because of the great inequalities in the country. For the bulk of the Indian population, thus, aggregate GDP recovering to Pre-Covid levels may be largely academic.