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Below is Perspective on GDP data by Ms. Madhavi Arora, Lead Economist, Emkay Global Financial Services

“The continued vaccine drive led mobility ahead and aid the pick-up in the contact-sensitive services sector has helped in a healthy growth print. Even with YoY moderation to 8.4% frm 20.1% 1Q reflects largely base effect even as sequential momentum has continued to improve. The data affirm that the economy is on continuous  mend and will likely be back to pre-pandemic levels before end-FY22. We reckon that the nascent recovery ahead may partly still be led by capital and profits and may have traces of a scarred and segmented labor market ( as seen by slowing rural demand) and sub-optimal effective fiscal policy stimulus. However, exogenous demand drivers in the form of exports and sustained government capex will need to create a growth bridge till private investment and consumption recover optimally. To policymakers’ credit, a public investment push appears key to their growth revival strategy. Policy support in the form of physical and social infra outlays will have a large multiplier effect on jobs (even at the bottom of the economic pyramid) and will eventually catalyze private investment. This, in conjunction with initiatives like privatization, tax reforms and expenditure realignment, will likely create fiscal space to fund public investment.”

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