GDP GROWTH TRENDS

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Context

GDP growth in January to March quarter of 2022 was 4.1 per cent according to the data released by the National Statistical Office (NSO).

Highlights

The GDP growth for quarter 1 of FY2021-22 (April-June) was at 20.3 per cent, for quarter 2 (July-September) at 8.5 per cent, for quarter 3 (October-December) at 5.4 per cent, and quarter 4 (January to March this year) at 4.1 per cent.
For the full year (April 2021 to March 2022), the country's economic growth of 8.7 per cent was lower than the 8.9 per cent the government had projected three months back.
The economy's near-term prospects have darkened due to a spike in retail inflation, which hit an eight-year high of 7.8 per cent in April.
The government's intervention in the form of duty cuts on imports, subsidies on fertilizers and cooking gas, duty cuts on fuels to protect consumers and businesses from high inflation is likely to impact the fiscal deficit in the coming quarters.

Factors in play

First, the Covid-induced curbs and then the war in Ukraine added to higher commodity prices and a supply squeeze.
Global crude oil prices have hardened back to $120 per barrel after increased sanctions on Russian oil.
The difference between the real and nominal GDP suggests that inflation has been a persistent problem, and the economy has been fighting the challenge of rising prices for a long time now.
A slowdown in global growth, elevated energy prices, a cycle of rising interest rates and a tightening of financial conditions would all be key headwinds.
With rising inflationary pressures, the consumption recovery remains under a cloud of uncertainty for 2022/23.

Some Positives

India as the country is better placed than other nations. Stagflationary risk to India is quite low compared to other countries. Stagflation is the phase when both inflation and unemployment rates are high with moderation in GDP growth.
Momentum in the service sector will be one of the key drivers apart from the government's focus on enhancing public capital expenditure.
During quarter 4, private consumption expenditure grew by 7.9 per cent, reflecting some impact of pent up demand. There was also a revival in contact-intensive services in the last quarter which has helped the GDP print reach respectable levels.
The eight core infrastructure industries grew by 8.5 per year-on-year in April 2022, a six-month high. Except crude oil and steel, all other infrastructure industries recorded positive growth during the month.

Must Read: GDP: https://www.iasgyan.in/daily-current-affairs/gdp-23