The latest national income estimates for 2021-22 released by the NSO have pared growth hopes from 9.2% to 8.9%, compared to the 6.6% contraction in 2020-21. GDP growth (October- December 2021 quarter) Q3 is pegged at 5.4%, compared to the 0.7% recorded in the same quarter of 2020, when the economy returned to the growth zone after two quarters of sharp contraction. The headline Q3 growth number was expected to moderate from the 20.3% and 8.5% recorded in the first two, but not as much as it has. GVA, projected to rise 8.3% for the full year, compared to the 4.8% contraction in 2020-21, recorded only 4.7% growth in Q3. The overall trajectory is a tad disheartening, with little comfort to glean even when the numbers are spliced. Construction sector GVA actually contracted 2.8% in Q3, when infrastructure spending push was expected to be reviving its fortunes. Manufacturing recorded a mere 0.2% increase in a quarter that included India’s annual festive boom, possibly indicating that smaller firms remain hobbled. The largely contact-intensive segment of trade, hospitality, transport, communication and services related to broadcasting also continued to languish well below pre-pandemic levels.
That sectors critical for jobs are still in trouble is also reflected in private consumption staying below pre-pandemic levels. The resurgence of retail inflation past 6% in January, with the overhang of a sharp retail fuel price spike after the Assembly polls, could cripple consumption further. Core sectors’ output growth in January and persistent manufacturing job losses in February (indicated by the PMI), suggest these pieces of the recovery puzzle will not be fixed in a hurry. It also means that the 4.8% growth assumption for Q4, built into the 8.9% growth calculations for this year, may be too optimistic. These portents are far from comforting, even in a business-as-usual scenario for an economy that had recorded several quarters of moderating growth before the COVID-19 pandemic tipped it over. India may have coped better with the Omicron variant, but external risk factors have risen dramatically. Large central banks’ moves to tighten liquidity faster than expected, in the face of soaring inflation driven by runaway oil prices, have roiled financial markets. The unchartered implications arising from the Ukraine crisis only add to the challenge. Apart from gearing up to pre-empt imported inflation spikes, the Government needs to extend greater policy support, preferably going beyond credit guarantee offers, to sectors still in the doldrums. It also needs to exert greater energy to ensure its grand infrastructure spending plans get off the ground faster to have a salutary effect on the economy. The multi-layered uncertainties ahead necessitate that policy makers cut no slack, either in action or reaction.