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In its first advance estimates, CSO expects real GDP growth at 9.2% YoY in FY22

Similar to our forecast of 9.1%, but lower than RBI’s 9.5%

* The Central Statistics Office (CSO) has pegged real/nominal GDP at 9.2%/17.6% YoY in FY22, compared to our estimate of 9.1%/16.7% YoY. The CSO’s forecast is lower than RBI’s projection and market consensus of 9.5% YoY.

* On the consumption front, the Centre expects rapid growth of 13.9% YoY in government consumption expenditure (GCE) in 2HFY22 v/s our forecast of only 5.1% YoY (and 1% YoY in 1HFY22) growth. Besides, the government expects private consumption expenditure (PCE) to grow mildly by 1.8% YoY v/s our forecast of 7% YoY (and 13.5% YoY in 1HFY22). For FY22, CSO expects PCE to grow by 6.9% YoY (v/s -9.1% YoY in FY21) and GCE to grow by 7.6% YoY (v/s 2.9% in FY21).

* The government expects gross capital formation (or real investments) to grow by 6.9% YoY in 2HFY22 as against our forecast of 5.9% YoY (and 32.3% YoY in 1HFY22, which was led by a very low base of -28.7% YoY in 1HFY21). Therefore, real investments are expected to grow by 17% YoY in FY22 as compared to our forecast of 16.4% YoY growth.

* As for GVA, while the government expects it to grow by 4.8% YoY, we believe it will grow slightly faster by 5.1% YoY in 2HFY22, leading to a growth of 8.8% YoY in FY22 as against the government’s calculation of 8.6% YoY.

* Within the GVA components, CSO’s estimates are not too far off from ours. It expects the farm sector to grow by 3.4% YoY (v/s our forecast of 3.7% YoY) and the industrial sector to grow by 3.6% YoY (v/s our forecast of 4.2% YoY) in 2HFY22. The CSO expects service activity to grow by 6% YoY in 2HFY22, while we expect it to grow by 6.2% YoY.

* Overall, there were no major surprises in the first advance estimates of real GDP/GVA growth for FY22. The numbers are in line with broad expectations. There are, however, three key takeaways:

a) The good news comes on the nominal GDP growth front. It effectively implies that the central government has more fiscal space to expand because of a higher denominator (in the fiscal deficit as a percentage of GDP). Considering actual data available up to Nov'21, it seems difficult for the government to use that space. While the government has already achieved 74% of its budgeted net receipts during Apr-Nov’21 (which is higher since the past quarter of a century), its total spending is still lagging at only 60% (v/s an average 66% spend during FY16-20).

b) Do note that even after a 6.9% YoY growth in PCE (as expected by the CSO) in FY22, it is still 3% lower compared to FY20 levels.

c) If India does record a real GDP growth of 9.2% YoY in FY22, it implies that real per capita GDP stands at INR0.107m in FY22 as compared to INR0.108m in FY20.

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