The Indian economy has moved a muscle.
In Q3, real GDP growth rose by 5.4% as against 8.5% growth seen last year. Though the impact of Omicron virus will likely be limited, and notwithstanding a fast rebound, FY22 growth estimates are reivsed downward to 8.9% as against 9.2% projected in the first advanced estimates.
Assuringly, growth was driven by services sector rather than manufacturing, largely propped up by festive sales, but that whizz-bang is unlikely to have spilled over to Q4, or the current quarter. The new year began with a rapid onset of the third wave of Covid-19 infections, disrupting mobility and affecting contact-intensive businesses, thus reducing the fate of services sector to one day chicken, next day feathers.
We are barely wiping out the economic legacy of the pandemic, but the ongoing Russia-Ukraine crisis has put everyone on the edge. If the situation intensifies further, it can have the global economy in a half-nelson, yet again. For India, which is as it is projecting a dispiriting 11.1% nominal growth in FY23, considering the stickiness in global commodity prices besides others, another economic hit, just when unemployment rate is recovering, will send us round the bend. Private consumption expenditure, the bloodstream of any economy, too has made an incomplete recovery, and even a slightest push will throw it far away from going gangbusters.
As per the National Statistics Office's provisional estimates, real GDP printed at Rs 38.22 lakh crore in Q3, FY22 as against Rs 36.26 lakh crore a year ago. On a sequential basis, growth stood at 6.4%.
Among the eight broad metrics of growth, manufacturing saw the slowest growth, while construction disappointingly slipped into negative territory. Others like trade, hotels, financial services and public administration registered growth over last year, and even on a sequential basis.
The output of agriculture and allied sectors shot up to Rs 6.6 lakh crore from Rs 4 lakh crore in Q2 despite clear signs of weakness in rural-consumption data. But growth was slower in mining and electricity and other utility services. On the expenditure side, the three broad components -- investment, production and consumption -- fared well.
Government expenditure saw its share decline both sequentially and annually, from 9.8% in Q2, FY22 and 9.5% in Q2, FY21 to 9.3% in Q3, FY22. Helpfully, private consumption picked up both sequentially and over the previous fiscal led by the boost from reopening and festive tailwinds. Investments too maintained momentum crossed-past pre-pandemic levels and should likely fare better from hereon.
As the RBI noted, recovery in domestic economic activity is yet to be broad-based as private consumption and contact-intensive services remain below pre-pandemic levels. RBI's bi-monthly consumer confidence survey conducted in January reflects continued weakness in consumer sentiments compared to its previous survey done in November, 2021. Likewise, the central bank's Industrial Outlook survey too shows decline in business expectations index for Q3, FY22 after its steady increase since Q2, FY21.
Capital goods imports, one of the key indicators of investment conditions has increased consistently above the FY20 levels during Q3, but to sustain this improvement in the overall demand conditions would be crucial.