Advance Estimates Peg Q3 GDP at 9.2% for FY22

On the 07th of January, the National Statistical Office of MOSPI announced the first advance estimates for FY22 GDP. The MOSPI has pegged the likely GDP for FY22 at 9.2%. Of course, this is subject to revision as the remaining two quarter GDP data also comes in.

The notable point is that this estimate is lower than the RBI estimate of 9.5% FY22 GDP and it looks like MOSPI is making provisions for any likely negative impact that the Omicron variant may have on the GDP growth in the full fiscal year.

On the positive side, the overall GDP for FY22 as per the projection is up 1.27% over the FY20 levels. That is a positive as it shows that the COVID effect may be neutralized. Even the gross value added (GVA) for the FY22 fiscal year is projected 1.89% higher than FY20.

If you look at the specific components, agriculture is up 7.7% over FY20 while manufacturing is up 4.4% over FY20. Remember, we are considering 2 year growth in all cases as the one year growth may look high due to low base effect. This shows pre-COVID impact.

The one segment that has actually suffered even on pre-COVID levels is hotels, trade, tourism and transport which is -8.5% below the FY20 levels. That is now surprising as these high contact businesses are still facing the lag effect of the lockdowns and restrictions.

We have seen the output part of the GDP story. But where has all the output gone or where has all the money gone? In other words, let us look at GDP from the other side, i.e. who actually consumed this GDP and which segment has actually grown.

Government spending is up 10.7% over FY20 and even gross capital formation is up 2.56% over FY20. That means government is spending and even corporates are starting to invest. But private consumption is still -2.9% below FY20 and that is hitting demand in a big way.

There are two final aspects of the GDP story to keep an eye on. Firstly, both exports and imports are up more than 11% over FY20. That is solid pre-COVID growth and shows that trade is one area that has triggered growth. But rising imports are a concern.

The one area of imports that is concerning is gold. India imported $56 billion of gold and that impact is seen in GDP data. The MOSPI estimates the stock of valuables to go up 78% on a YoY basis, which is not good news. From a macro perspective, the economy would be happier if this goes into private consumption.