India's economy grew 1.6% in the January-March period before the second wave of Covid-19 hit the country. The two consecutive quarters of growth also helped limit the full financial year (2020-21) contraction to 7.3%, which was better than street expectations.
Prior to this, the economy posted a growth of 0.4% in the October-December period of 2020-21 for the first time after the first wave of the pandemic pushed it into two successive quarters of contraction.
Government data showed that economic growth in the three months to March was mainly driven by the manufacturing sector, which grew by 6.9% as against 1.3% in the previous three months (October-December).
This was followed by the agriculture sector, which grew at 3.1% in the three months to March. Agriculture was the only sector that registered growth in all the four quarters of the financial year 2020-21, which was largely hit by Covid-19 and related lockdowns.
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Among others, the construction sector posted a growth of 14.5% in the January-March period, up from a 6.5% growth in October-December.
Among the sectors that contracted included trade, hotels, transport and communication.
Analysts, however, warned of risks to growth in the coming quarters due to sporadic lockdowns owing to the second Covid wave and the slow pace of the vaccination programme.
“The better-than-expected growth print partly owes it to healthy corporate results in the March quarter of FY21. The situation is still in flux, and it is too nascent to gauge the true impact of second-wave on macro variables. We believe the impact is unlikely to be of the same magnitude as last year.
Clearly, factors such as better-adapted firms and policy response, stable financial conditions and robust global growth spillovers create growth buffers back home. However, a credible vaccine drive remains the key,” said Madhavi Arora of Emkay Global Financial Services.
The expenditure trends showed the strongest growth in government consumption expenditure. It grew at 28.3% in the March quarter after contracting 1.1% in the previous quarter. For the full financial year 2020-21, it rose by 2.8%. As opposed to that, the full-year private consumption contracted 9.1%.
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