Economy updates - Indian GDP growth estimates, World Trade growth 2021

Important updates on India's quarterly GDP growth, and World trade pickup in 2021

 Economy updates - Indian GDP growth estimates, World Trade growth 2021

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• Indian GDP growth estimates: Various agencies have released their estimates of economic growth for April-June 2021 quarter.

1. The GDP growth will be at the "deceptively high" level of 20 per cent for the April-June 2021 quarter but far below the same in the pre-COVID times
2. ICRA's analysis says the low base of the last year, when the GDP had contracted by close to 24 per cent, "conceals" the impact of the second wave of COVID-19 infections
3. Economic activity is boosted by robust government capital expenditure, merchandise exports and demand from the farm sector, it said, estimating the GDP to grow by 20 per cent and the gross value added (GVA) will register a growth of 17 per cent for the June quarter. The GVA is estimated to contract 15 per cent when compared to the preceding March quarter, which shows the impact of the second wave.
4. The RBI expects the GDP to expand by 21.4 per cent in the quarter as per its revised estimates released earlier this month. The official data on economic activity from the central statistics office is expected by end of the month.
5. Construction activity benefitted from the healthy Central and the state government capex spending in Q1 FY2022, which exceeded even the pre-Covid levels of Q1 FY20.
6. With a contraction in the Government of India's (GoI's) non-interest non-subsidy revenue expenditure and continued impairment in demand for contact-intensive services, the agency expects GVA in the services sector to post a relatively lower expansion of 12.7 per cent in Q1FY22.
7. GVA growth in agriculture, forestry and fishing is likely to print at 3.0 per cent, benefitting from the healthy Rabi harvest. Despite the higher incidence of Covid-19 cases in rural India in the second wave, healthy crop output and procurement, as well as higher minimum support prices appear to have buffered the farm sector's demand during this challenging period.
8. The organised sector is expected to have gained at the cost of the less formal space during this period. So a lot of economic growth estimates may actually be wrong, as the pain of unorganised sector stays masked for a longer period.

• World Trade growth 2021: Indian exporters should be pleased that the WTO’s Goods Trade Barometer indicated global trade in goods continuing its robust recovery from the shock of the Covid-19 pandemic. There is an increase in indices for air freight, container shipping, raw materials and auto.

1. The barometer is an indicator providing real-time information on the trajectory of merchandise trade, and hit a record high in its latest reading issued on Wednesday.
2. The WTO cautioned that Covid-19 continues to pose the greatest threat to the outlook for trade, as new waves of infection could easily undermine the recovery.
3. The latest reading of 110.4, 10 points above the baseline value of 100 for the index, is up more than 20 points year-on-year, reflecting the strength of the ongoing recovery and the depth of the pandemic-induced shock in 2020.
4. Data suggest that the trade recovery may be slowing as the barometer index has started to rise at a decreasing rate. The forward-looking export orders index (109.3) has also turned down, suggesting that upward momentum in trade may have peaked.
5. India has set an ambitious export target of $ 400 billion for 2021-22 as opposed to goods exports worth $290 billion in the previous fiscal. While exports from the country performed well in the April-July 2021-22 period, posting an increase of 73.5 per cent to $130.53 billion as the country recovered from Covid disruptions, the flow of global orders must be maintained if the country is to meet its high growth target.
6. The latest barometer results are consistent with the WTO’s most recent forecast of 8 per cent growth in world merchandise trade volume in 2021 following a 5.3 per cent drop in 2020.
7. The latest barometer reading suggests that goods trade will see an even bigger year-on-year increase in the second quarter (of the calendar year), with growth moderating thereafter. The pace of recovery could be restrained by supply chain disruptions – the semiconductor shortage that has recently hampered vehicle production.

 

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