India's GDP grows 8.4% in Q2 2021-22, compared to 7.4% contraction a year ago

India's GDP grew by 8.4 per cent in the second quarter (July-September) of 2021-22 fiscal year, compared to a 7.4 per cent contraction a year ago, showed official data released on Tuesday by the Centre. This shows that India’s effort to boost consumption through government spending and low-interest rates is paying off, with the economy gaining strength just as a new coronavirus variant emerges as the top threat to a global recovery.

According to the figures issued by the Union ministry of statistics and programme implementation, the gross domestic product (GDP) at constant prices in Q2 2021-22 is estimated at ₹35.73 lakh crore, as against ₹32.97 lakh crore in Q2 2020-21, showing a growth of 8.4 per cent as compared to the 7.4 per cent contraction in this quarter a year ago.

The read-out for the September quarter was in line with the 8.4 per cent growth forecast by most analysts and follows a record growth of 20.1 per cent in the previous quarter. The economy had contracted 7.4 per cent in the same quarter a year earlier, according to revised figures, when it struggled with coronavirus disease (Covid-19) pandemic-related restrictions.

The recovery is “led by the services sector, with individual mobility back to pre-Covid levels, and ultra-accommodative financial conditions,” as well as higher government expenditures, an analyst cited by Bloomberg said.

Most analysts now expect the financial year (FY) 2022 growth to be between 9.3 per cent to 10 per cent with a marginal downside, assuming there is no severe Covid-19 wave once again. However, apprehensions still run high, considering there is now an unknown variable in the equation in the form of the new coronavirus variant, omicron, which has grabbed the world by storm.

Meanwhile, according to the data released by the Controller General of Accounts (CGA) on this day, the Union government's fiscal deficit works out to be ₹5.47 lakh crore or 36.3 per cent of the budget estimates at the end of October 2021 on the back of improvement in revenue collection. The deficit figures in the current fiscal appear better than the previous financial year when the gap between expenditure and revenue had soared to 119.7 per cent of the last year's Budget Estimates mainly on account of a jump in expenditure to deal with the Covid-19 pandemic. In absolute terms, the fiscal deficit was ₹5,47,026 crore at the end of October, the CGA said.

India loosened fiscal and monetary policy to power through the pandemic-induced slump and has vowed to keep it like that for as long as necessary to support growth. Union finance minister Nirmala Sitharaman has made infrastructure spending a priority ahead of the February budget, where she will give an annual plan of the government’s expenditure and revenue goals.