<p>The economic growth data for the third quarter of the financial year (2021-22) and the second advance estimates for the whole year, released by the National Statistical Office (NSO) on Monday, are below expectations. The NSO expects the economy to grow at 8.9 per cent, lower than its earlier estimate of 9.2%. It also reported that the economy grew only at 5.4% in October-December 2021. The figures also indicate that growth is likely to slow down further to 4.8% in the current quarter. This might mean that the second half of the year might see only about 5.1 per cent growth, against 14.4 per cent in the first half. These are below the Reserve Bank of India projections and the government’s Budget estimates. The NSO expects nominal growth to improve but real growth to show a decline. This is probably because inflationary pressures are acting on the economy. </p>.<p>The figures show that the early momentum that was seen after the waning of the second wave of the pandemic was not sustained, and some sectors even slowed down. Manufacturing and construction are expected to grow at over 10% and mining at 12% this year, according to the NSO estimates. But the general expectation was that the growth rates of these sectors would be higher, especially because they had suffered serious contraction the previous year. Manufacturing did not grow, and construction shrank in the third quarter on a year-on-year basis. The trade and hospitality sector, which was badly hit and contracted by over 20% in 2020-21, is yet to come out of its dire straits. Prospects for investment and private consumption, which is a key driver of growth, are still not very bright. Investment is expected to grow only 1.6% in the second half and private consumption is likely to fall in the current quarter. </p>.<p>It is likely that the NSO estimates may not have given a correct picture of the actual situation on the ground. The disruption caused by the third wave may not have been fully captured in the estimates. There are also other uncertainties that may yet affect the economy adversely. Russia’s war against Ukraine will impact global trade and economy in general and the Indian economy in particular. The longer the conflict lasts, the worse the impact will be. Inflation has been an ignored but real threat to the economy and will continue to be so. The course of the pandemic is not clear yet, but it may be premature to decide that it is fully behind us. Both the government and the RBI will have to be prepared to face a situation that may be worse than that shown by the NSO numbers.</p>
<p>The economic growth data for the third quarter of the financial year (2021-22) and the second advance estimates for the whole year, released by the National Statistical Office (NSO) on Monday, are below expectations. The NSO expects the economy to grow at 8.9 per cent, lower than its earlier estimate of 9.2%. It also reported that the economy grew only at 5.4% in October-December 2021. The figures also indicate that growth is likely to slow down further to 4.8% in the current quarter. This might mean that the second half of the year might see only about 5.1 per cent growth, against 14.4 per cent in the first half. These are below the Reserve Bank of India projections and the government’s Budget estimates. The NSO expects nominal growth to improve but real growth to show a decline. This is probably because inflationary pressures are acting on the economy. </p>.<p>The figures show that the early momentum that was seen after the waning of the second wave of the pandemic was not sustained, and some sectors even slowed down. Manufacturing and construction are expected to grow at over 10% and mining at 12% this year, according to the NSO estimates. But the general expectation was that the growth rates of these sectors would be higher, especially because they had suffered serious contraction the previous year. Manufacturing did not grow, and construction shrank in the third quarter on a year-on-year basis. The trade and hospitality sector, which was badly hit and contracted by over 20% in 2020-21, is yet to come out of its dire straits. Prospects for investment and private consumption, which is a key driver of growth, are still not very bright. Investment is expected to grow only 1.6% in the second half and private consumption is likely to fall in the current quarter. </p>.<p>It is likely that the NSO estimates may not have given a correct picture of the actual situation on the ground. The disruption caused by the third wave may not have been fully captured in the estimates. There are also other uncertainties that may yet affect the economy adversely. Russia’s war against Ukraine will impact global trade and economy in general and the Indian economy in particular. The longer the conflict lasts, the worse the impact will be. Inflation has been an ignored but real threat to the economy and will continue to be so. The course of the pandemic is not clear yet, but it may be premature to decide that it is fully behind us. Both the government and the RBI will have to be prepared to face a situation that may be worse than that shown by the NSO numbers.</p>
