The Indian economy continued its recovery trajectory, but its growth in the September-December quarter showed that sectors such as manufacturing and construction continue to be on a weak footing.
According to the National Statistical Office’s (NSO’s) second advance estimates of GDP for 2021-22, the economy grew at 5.4% in the third quarter. The statistics office also pared the overall growth forecast for this fiscal year to 8.9% from 9.2% estimated in January.
While the services sector registered growth of 8.2%, manufacturing remained almost static. According to NSO data, Gross Value Added growth in the manufacturing sector was a mere 0.2% in the third quarter, compared with growth of 8.4% a year ago.
Construction sector growth declined by 2.8% against growth of 6.6% a year ago. India’s farm sector, which was relatively unaffected by the Covid-19 pandemic slowdown, showed modest growth of 2.6% in the third quarter compared with 4.1% growth a year ago.
The manufacturing, construction and farm sectors are labor-intensive and employ a major chunk of the country’s workforce. As a result, India’s unemployment rate remains high and in December it rose to nearly 8%, though it cooled off a bit in January (6.57%), according to the Centre for Monitoring Indian Economy.
For the upcoming January-March quarter, experts believe the adverse impact of the third wave of the pandemic on contact-intensive services sectors and the spike in commodity prices owing to the Russia-Ukraine war may put further pressure on gross domestic product growth in FY22.
A couple of experts like former World Bank chief economist Kaushik Basu and former central bank chief Raghuram Rajan had earlier pointed out that India’s recovery from the Covid-19 pandemic induced slowdown had been uneven.
Basu said that although India’s overall macroeconomic situation was in recovery mode, the growth was concentrated at the top end. He said “the bottom half of India” is in recession and lamented the country’s policymakers have done little to address their concerns.
Rajan said the Indian economy had bright as well as dark spots. While the export industry was doing well and India’s IT industry was upbeat as global demand was on the rise, the high contact service industry and the lower middle class were going through a very tough time.
He said the rise in the number of people employed in agriculture indicated that jobs in cities had come down and these workers had been forced to take jobs in the agriculture sector.