Pent-up demand, festive spending and a jump in government expenditure helped bring back growth in the Indian economy after two consecutive quarters of contraction.
Gross domestic product rose 0.4%, in real terms, in the October-December quarter of 2020-21 over a year ago, compared to a revised contraction of 7.3% in the previous quarter, showed data released by the Central Statistics Office on Feb. 26.
In gross value added terms, the economy grew 1% in the third quarter of the ongoing financial year.
A Bloomberg poll of 26 economists had estimated Q3 GDP growth at 0.5%. GVA was estimated at 0.7% according to 13 economists.
A sharp recovery in manufacturing, construction and the government sectors, along with sustained agricultural expansion is what boosted the headline growth figure. To be sure, most sectors, except mining, have witnessed growth in Q3 on a year-on-year basis.
Expenditure trends show government and private consumption expenditure continued to contract in the third quarter.
- Private consumption, reflected in private final consumption expenditure, contracted 2.3% in Q3 compared to a contraction of 11.3% in Q2.
- Investments, as reflected by gross fixed capital formation, grew by 2.5% in Q3, after a contraction of 6.8% in Q2.
- Government final consumption expenditure contracted by 1.1% in Q3, after a contraction of 24% in Q2.
Full Year Contraction Deeper
For the full year, GDP is estimated to contract by 8% in the ongoing financial year, according to the second advance estimates released today, higher than a contraction of 7.7% forecast in the first advance estimates released at the end of January. This as today’s data shows a sharper contraction in the first quarter, at 24.4% versus the earlier estimate of 23.9%, whereas the second quarter contraction has been revised to 7.3% from the earlier 7.5%.