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NEW DELHI : India’s economy expanded at a record 20.1% pace in the June quarter over a low base, aided by a rebound in manufacturing and construction activities, suggesting the economy showed resilience in the face of the second wave of the pandemic.

However, compared to the pre-pandemic June quarter of FY20, GDP contracted 9.2%, indicating the ground lost to the pandemic, data released by the ministry of statistics and programme implementation showed. A Bloomberg survey of 45 economists expected a 21% expansion in the June quarter from a year earlier.

Last year’s strict nationwide lockdown had halted economic activity, causing the economy to contract a record 24.4% in the June quarter. Still, the latest numbers show that the economy has weathered the devastating second wave of the pandemic better than initially expected.

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The GDP growth figure is a historic high because of the low base effect and masks the impact of the second wave in the quarter, said Rumki Majumdar, an economist at Deloitte India. “The agriculture sector has been the silver lining and has been the strongest pillar of growth. While manufacturing and construction activities have bounced back strongly, they are yet to emerge from the pandemic impact as they are not yet above the pre-covid levels," Majumdar said.

The June-quarter expansion is, however, slightly slower than the Reserve Bank of India’s (RBI’s) forecast. The central bank projected a 21.4% GDP growth for the June quarter and a 9.5% growth for the full year. The slower growth rate may allow RBI to retain its accommodative stance for longer.

On Tuesday, the finance ministry’s chief economic adviser, Krishnamurthy Subramanian, told reporters that India’s macroeconomic fundamentals are strong, and the country is set for robust growth on the back of structural reforms, the government’s spending boost and rapid vaccination. Subramanian said the June quarter GDP data reaffirmed the government’s prediction of an imminent V-shaped recovery.

GDP data showed that the gross value added in the manufacturing sector grew 49.6% from a year earlier. Construction grew by 68.3% in the June quarter. Both these sectors had contracted sharply in the June quarter of FY21.

The farm sector expanded at 4.5% in the June quarter this year, faster than the 3.5% growth it saw a year ago, while the category ‘trade, hotels, transport, communication and services related to broadcasting’ expanded by 34.3%, regaining some of the ground lost.

The share of gross fixed capital formation or investments in GDP stood at 31.6% in the June quarter of FY22 compared to 24.4% in the year-ago period. Government spending as a share of GDP moderated to 13% in the June quarter from 16.4% in the same time a year ago.

Separately, data released by the commerce and industry ministry on Tuesday suggested growth in key infrastructure sectors continued to expand in July. The output of core infrastructure industries grew 9.4% in July, driven by strong growth in refinery throughput, electricity generation and steel and cement production. This is the fifth consecutive month of core sector growth after the contraction in February. The core sector saw a 9.3% growth in June.

Data released by the Controller General of Accounts on Tuesday showed a strong recovery in the central government’s finances in the April-July period from a year ago.

India’s fiscal deficit or gap between receipts and spending met through borrowing stood at a modest 3.2 trillion at the end of July, accounting for 21.3% of the full-year target. The Centre’s fiscal deficit stood at 8.2 trillion, exceeding the full-year target in the year-ago period.

In the first four months of this fiscal, the Centre’s gross tax revenue stood at 6.9 trillion, aided by healthy income tax and goods and services tax collections. At the end of April-July period, the revenue deficit stood at 2 trillion, or about 18% of the budget estimate.

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