Why did the government downsize the full year FY22 advance estimate for GDP growth from 9.2% to 8.9%?

On 07th January the National Statistical Office (NSO) of the Ministry of Statistics and Program Implementation (MOSPI) had released the first advance estimates (AE) of full year GDP for FY22. Back then, the full year GDP growth for FY22 had been pegged at 9.2%. On 28th February, the second AE of full year GDP for FY22 was released pegging growth at 8.9%. Now, the final GDP figure will be released on 31st May.

For the current fiscal year, the NSO has 3 quarters of data already available. For instance, the GDP growth came in at 20.5% in Q1, 8.5% for Q2 and 5.4% for Q3. These are the quarterly GDP growthy that is annualized. Already, there are apprehensions that the Q4 GDP growth could be much lower and could pull down full year GDP for FY22. How much lower it could be is not too clear from the current data points, so we have to wait.

The full year GDP is expected to grow to Rs148 trillion in FY22. The million dollar question is which are the segments that will drive this growth in GDP among key components.

· Private consumption is finally growth and is expected to grow at 1.16% in FY22 over FY20 indicating that finally, the private consumption is driving GDP growth.

· Government consumption spending is up 8.59% between FY20 and FY22. After a sharp spike in FY21, it has tapered in FY22 which is the right way ahead as now the private consumption spending has got to take over, instead of depending on governments.

· People are still loving idle assets. The VALUABLES expanded by 106% from Rs1.65 trillion in FY20 to Rs3.39 trillion in FY22. These safe havens are justified but unproductive.

· Finally, trade still plays a pivotal role in GDP growth. For example, exports are likely to grow 9.88% for FY22 over FY20 while imports are expected to grow at 11.94% over the two year period. That is also an indication of a sharply higher trade deficit.