“This pickup benefitted from the continued unlocking of the economy, uptick in consumption during the festive season, as well as higher Central government spending,” said Aditi Nayar, the agency’s principal economist.
While nearly all leading indicators tracked by ICRA showed improvements in volume terms, the figures also benefited from a low base effect of the corresponding period in the previous fiscal, she said.
“The outliers that continued to contract in Q3FY2021 included sectors such as aviation, reiterating that the contact-intensive portion of the economy will take longer to recover,” Nayar added.
Apart from the festive season boost to private spending, central government expenditure supported the positive growth for the quarter as capital expenditure and net lending increased by a significant 118% in Q3FY21, in contrast to the contraction of 39% in the previous quarter, ICRA said.
India’s economic contraction moderated sharply to 7.5% in the second quarter of the current fiscal after recording a record 23.9% gross domestic product shrinkage in the first quarter of FY21.
On the other hand, the capital outlay of 19 states including Andhra Pradesh, Gujarat, Uttar Pradesh, Haryana, Karnataka, Kerala, Madhya Pradesh, Odisha, Punjab, Rajasthan and Telangana fell 14% in Q3FY21 after a massive 42% decline in the previous quarter, the report said.
Highlighting the uneven nature of the recovery, the formal part of the Indian economy was gaining traction at the cost of the smaller and less formal segment, the report said.
This is hastening the process of the formalisation of the economy and contributing to a consolidation in favour of the larger and more reputed players in certain sectors,” Nayar said.