Nomura expects Q1FY22 GDP at 29.4%; CARE Ratings bets on 14.5%

The government expenditure has been strong at 7.1 trillion – not as good as FY21 because at that time, there were a lot of income transfers but compared to FY20 again, government expenditure has been better. Capital expenditure has been even stronger compared to last year. Both are big inputs into GDP.

The other big input into GDP is the export performance. Exports are showing 18 percent growth over FY20.

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Imports did well compared to FY21 but compared to FY20, it has still not caught up, it’s still lower by about 3 percent.

So net exports will be a boost to GDP and exports aren’t small; it contributes around 18 percent to the GDP.

Finally in Q1, the corporate performance was very good, sales grew 50 percent, EBITDA grew 41 percent, profit after tax (PAT) grew 100 percent but it is usually the EBITDA, which is the biggest input into GDP and that is a good 41 percent.

Q1 GDP is likely to have upside surprises. In the midst of the second COVID surge, everyone had downgraded growth estimates but by July, we started getting GDP upgrades; Reserve Bank of India (RBI) upgraded Q1 GDP from 18 percent to 21 percent; agriculture, manufacturing and public administration have done well despite COVID. But services form 60 percent of India's GDP and that's where the hurt will come from.

Aurodeep Nandi, economist, vice president at Nomura India, is the most bullish in terms of GDP growth expectations.

“We are looking at 29.4 percent year-on-year (YoY), which is obviously higher than what the RBI is saying - 21.4 percent, and I think that's where the consensus is also settled,” he said.

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According to him, the numbers to watch out for are private consumption, the extent to which that is falling, how resilient fixed investment is and finally, how exports and the net export sector is doing.

Madan Sabnavis, chief economist at CARE Ratings, said, “We are quite off the mark, because I think we are looking at something in the range of 14-14.5 percent. Because overall for the year, we are looking at something in the range of 8.8-9 percent.”

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“Service sector is where we feel that things could be more on the downside than on the upside. And we should remember one thing that notwithstanding what kind of numbers we're looking at, the GDP growth had fallen by over 20 percent last year. So, whatever we see this year, will not even bring us back to the level of fiscal 21. That's the important point,” said Sabnavis.