ICRA estimates 20 percent growth rate in the first quarter, but will remain neutral due to the huge decline of last year

ICRA estimates 20 percent growth rate in the first quarter, but will remain neutral due to the huge decline of last year

GDP expected to have double digit growth

According to the credit rating agency ICRA, the GDP growth rate is estimated to be 20 percent in the first quarter of the current financial year. The rating agency has said that in the first quarter of the financial year 2021-22, the country’s GDP growth rate will increase by 20 percent. This is much more visible due to the low base rate of last year, but in the first quarter of the last financial year (2020-21), there was a decline of 24 percent in the GDP. Accordingly, it is still less than four per cent.

ICRA says that due to increase in government’s capital expenditure, export of goods and demand from the farm sector, GDP may increase by 20 percent, while gross value (GVA) may increase by 17 percent. It is possible. Given the 15 per cent fall in GVA in the first quarter of the last financial year, this increase will also be marginal.

Double digit growth neutralized by last year’s steep fall

ICRA’s Chief Economist Aditi Nayar has said that the GDP may grow in double digits during the first quarter of the financial year 2021-22 as the economy had declined by about 24 per cent in the first quarter of the last financial year. Therefore, its impact on growth will be less. RBI has also estimated a growth rate of 21.4 percent in the first quarter of the current financial year. Earlier this month, RBI presented this growth figure in its revised estimate. Growth figures will be released by the government at the end of this month.

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Significant increase in industry GVA

According to Icra, in the first quarter of the current financial year, the GVA of the industry is likely to grow by 37.5 percent. The construction and manufacturing sector will have the biggest role in this. In fact, restrictions across the country were less stringent during the second wave as compared to the first wave of corona virus and the pace of economic activity was comparatively faster. This seems to benefit the GVA of the industry. In the first quarter of the current financial year, due to increase in expenditure by the central and state governments, the construction activities are showing a spurt. Its industry GVA is getting benefited.

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