India’s 13.5% GDP growth comes as booster shot as China slows and US contracts

India’s economic growth rate of 13.5 per cent for the April-June quarter of the current financial year is expected to be a sentiment booster given the unprecedented rise in uncertainties across the world economy driven by surging crude oil prices.

The US economy– the world’s largest– contracted by 0.6 per cent during the same quarter while China, the second largest, recorded a mere 0.4 per cent growth. The European Union’s gross domestic product (GDP)–  a measure of national income and output —  grew by only 4 per cent in the April-June period.

Crude oil prices have skyrocketed following the Russia-Ukraine war, dealing a blow to the global economy. Besides, for China, the sustained zero Covid approach which has led to stringent shutdowns across provinces from time to time has also affected economic growth at a time when Beijing is already facing a severe crisis in the real estate sector. About 30 per cent of China’s GDP growth has been fuelled by the real estate sector which has impacted the country’s banking sector as well.

India’s GDP calculated with 2011-12 as the base year stood at Rs 36.85 lakh crore compared to Rs 32.46 lakh crore in the corresponding quarter of 2021-22.

In the April-June quarter of 2019-20, a year that serves as a crucial benchmark as it was before the outbreak of the pandemic—the India’s GDP was Rs 35.67 lakh crore. Simply put, therefore, India has not only managed to return to the pre-pandemic level but has grown 3.3 per cent compared to the April-June quarter of 2019-20.

India’s private final consumption expenditure — the overall expenditure incurred by households and other non-profit institutions stood at Rs 22 lakh crore – a 10 per cent increase over the pre-pandemic level of 2019-20. The figure in the same quarter in 2019-20 was Rs 20 lakh crore.

The aggressive drive of expanding the coverage of the Covid-19 vaccine across the country helped in containing the spread of the pandemic.

Prime Minister Narendra Modi’s push to big infrastructure projects such as the construction of 25,000 kilometres of highways in the current financial year has been critical in bringing economic growth back on track.

The government’s decision to keep bank credit flowing to the manufacturing sector also helped to spur growth and prevent the loss of jobs. Besides, unlike China, the fight against Covid-19 in India has been carried out in a targeted manner so that overall economic activity was not hit.

Credit growth to agriculture and allied activities improved to 13.2 per cent in July 2022 from 11.1 per cent a year ago, the Reserve Bank of India (RBI) data revealed. Similarly, credit growth to industry accelerated to 10.5 per cent in July 2022 from 0.4 per cent in July 2021.

India’s full year growth projection

Moody’s Investors Service on Thursday slashed India’s economic growth projection for the full year to 7.7 per cent from the earlier 8.8 per cent. The RBI, which had estimated a 16.2 per cent  growth rate for the April to June quarter of this year, pegged India’s GDP growth rate for the full financial year at 7.2 per cent.

“Though there could be some lowering of growth estimates, it is important to note that India’s macroeconomic fundamentals continue to remain strong, we need to play the cards well,” a government official told India Narrative.

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India’s GDP growth shoots up to 13.5% in April-June, highest in a year