India: Economy expanded 20.1% in Q1 – UOB

UOB Group’s Economist Barnabas Gan comments on the stellar GDP figures in the Indian economy during the first quarter.

Key Takeaways

“India’s GDP expanded at its fastest pace at 20.1% y/y in the first quarter of its fiscal year (1QFY2021/22: April - June 2021). This compares with a 1.6% y/y growth in 4QFY2020/21, but was slightly below market estimates of 21.0% y/y. Growth in Gross Value Added (GVA), which strips out tax and subsidy transfer payments, increased to 18.8% y/y in 1QFY2021/22, from a 3.7% expansion in the previous quarter.”

“On the back of a low base year in 1QFY2020/21, all GDP components in the expenditure approach (except for government expenditure) rose in 1QFY2021/22. Encouragingly, most components performed better when compared to the contraction pace in the same period last year.”

“The rebound in India’s GDP at the start of its new fiscal year is timely in setting an optimistic tone for its economic recovery in the year ahead.”

“Notwithstanding the rather optimistic tone above, we continue to stay cautious on India’s growth outlook.”

“In a nutshell, India’s growth prospects will depend largely on how COVID-19 evolves. India’s GDP had expanded strongly from its full-year contraction of 7.3% in FY2020/21, and anecdotal evidence from lower COVID-19 infections and higher vaccination rates are credible signals that the economy is gearing towards a more resilient growth pattern.”