Page 14 - CII Artha Magazine 1

The monthly trends also show B. LAGGARDS Faster-than-expected
Trajectory of Real GDP that public spending is Trends in Private Capital Expenditure normalisation of the US
progressing at a rapid clip. As Consumption demand monetary stimulus
50.0 30.0 (Value of Ongoing Projects*, Rs lakh crore)
per the latest data available on 72.0 71.77 continues to move at
40.0 20.1 8.4 20.0 CGA, capital spending for snail’s pace During the COVID-19
5.4 10.0 April-November FY22 stood 71.0 pandemic, the US Federal
30.0 4.6 3.3 3.0 0.5 1.6 0.0 at Rs 2.73 lakh crore, which is The disaggregated picture Reserve brought short-term
20.0 -7.4 13.5 per cent higher in 70.0 from the demand side shows interest rates to near-zero
that private final consumption
year-on-year terms and
-10.0 and restarted large-scale
represents 49.4 per cent of 69.39 69.27 expenditure (PFCE) continues bond purchases, referred to
10.0
-24.4 -20.0 the budgeted spend for the 69.0 to move at snail’s pace and as Quantitative Easing (QE). It
35.7 35.6 36.1 38.3 27.0 33.0 36.2 39.0 32.4 35.7
0.0 -30.0 current fiscal. Notably, it is 28.0 trails pre-pandemic levels. It helped in sharply bringing
Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22 per cent higher than the same 68.0 grew at a slower rate of 8.6 down the borrowing costs,
period in the pre-pandemic Apr-Dec FY20 Apr-Dec FY21 Apr-Dec FY22 per cent in the Q2FY22 as which cushioned the
Real GDP (Rs lakh crore) Real GDP growth (y-o-y%) (RHS) year of 2019-20. While the Source: CII analysis using CMIE CAPEX database compared to 19.3 per cent in economic recovery process
progress so far has been good, Note: *Ongoing projects = Outstanding projects - Implementation stalled the previous quarter as
Source: Central Statistics Office (CSO) in the US.
to achieve the budgeted capital impact of a favourable base
expenditure of Rs 5.5 lakh effect waned. With this, the However, in his recent
TAKING STOCK heartening to note that the A. DRIVERS OF GROWTH crore, the capex push by the Sectors such as Transport In absolute terms, the consumption spending grew remarks, the Federal Reserve
government needs to be
by 13.5 per cent in the first
merchandise exports have
services, Construction &
Chair Jerome Powell has
real GDP in absolute terms at
OF THE YEAR Rs 35.7 lakh crore in the Public investment sustained. One of the ways to Real Estate, Metals & Metals reached a cumulative value half of the current fiscal. indicated that the Fed will
However, encouragingly,
do so is to expedite the
Products and Chemicals &
of US$299.7 billion between
continues to do the
start tapering its bond
second quarter of this fiscal
has crossed the pre-pandemic heavy lifting as the key projects delineated under the Chemical Products, where April-December 2021, private consumption is now purchases soon in order to
at 96 per cent of the
National Infrastructure
sustained demand recovery is
The GDP print during levels of Rs 35.6 lakh crore demand-side driver of Pipeline (NIP), which are visible, are driving the recovery in which amounts to 75 per pre-pandemic level. keep inflation in check. This is
the economy
Q1FY22 showed that the seen in the second quarter of nearing completion. private investment and account cent of the US$400 billion likely to have repercussions on
economy expanded by an 2019-20. An analysis of the second for nearly 62 per cent of total export target set up by the Supply-chain bottlenecks interest rates globally, thus
government.
impressive 20.1 per cent - quarter of this fiscal shows Encouragingly, capital spending private investment spending by stifling growth impulses affecting foreign inflows to
testifying that the green From supply-side basis, real that public investment has by the government across key end of third quarter. Industrial sectors such as emerging economies like India.
shoots of economic recovery gross value added (GVA) continued to do the heavy infrastructure sectors has engineering goods, Supply-side bottlenecks However, compared to 2013,
are slowly but surely stood at 8.5 per cent in lifting as it bounced back to remained healthy at Rs 1.81 Healthy exports also petroleum products and especially related to coal and the Fed is being more cautious
becoming visible. However, Q2FY22 as compared to 18.8 the pre-pandemic levels in lakh crore in the period remain an enabler for organic & inorganic global shortage of in normalisation this time,
growth for the second quarter per cent in the previous Q2FY22. Gross fixed capital April-November FY22 which growth in the current fiscal chemicals have driven the semiconductors in the prioritising economic recovery
of the current fiscal (Q2FY22) quarter. formation (GFCF) was up translates into a healthy 61.7 bulk of the rise in export automobile sector affected even as inflation remains above
moderated to 8.4 per cent, 11.0 per cent in the second per cent growth in Global recovery, helped by growth in this fiscal so far. the growth of the industrial the target. The impact of Fed
which is primarily attributed Having taken stock of the quarter, largely supported by year-on-year terms over the rapid pace of vaccination, has Encouragingly, the sector, especially the MSMEs. taper will not be akin to the
central spending, taking
to waning of a favourable base economy, we now bucket the growth to 28.3 per cent in comparable period last year. boosted India’s external labour-intensive sector like This got mirrored in the 2013 taper tantrum episode,
of last year. movers and shakers of growth the first half of the current demand. Consequently, exports gems & jewellery has also passenger vehicle sales given India’s strong external
into the two broad heads of Out of the key infra sectors, have emerged as a critical declining in double digits by fundamentals, especially on the
DRIVERS and LAGGARDS fiscal as compared to 8.6 per Shipping, Road Transport & driver of growth in the current seen robust growth during 18.6 per cent for the third external front.
Notwithstanding, the and analyse their performance cent in the similar period in this period.
deceleration in growth noted below: 2019-20. Highways, Housing & Urban fiscal. straight month in November
in the second quarter, it is Affairs and Railways have so far 2021 despite strong demand High global commodity
seen higher cumulative in the local market. This was prices pressurise
spending during the year as the lowest sales in seven corporate margins
compared to last year. years for passenger vehicles.
Cumulative Capital Spending by Ministries as a per cent of Budget Estimates Merchandise Exports Performance (US$ billion) Global commodity prices
93% There are many factors have inched higher in the
73% 68% Private capex, too, has 313.4 291.8 299.7 attributable for the grave current year driven by an
66% started showing signs of 263.7 semiconductor shortages uptick in demand while supply
65% 61% recovery as per CMIE’s 233.8
56% being felt currently worldwide. has struggled to keep pace. In
44% capex data 198.2 From the supply side, there 2021, commodity markets
39% 164.4
37% 131.0 are factors such as temporary have been impacted by
31% 34% As per CMIE’s capex data, 95.5 factory closures due to the adverse weather conditions,

private capital expenditure 63.0 pandemic and disruptions in
(measured by the value of with droughts in some parts
10% 30.7 supply as storms halted
7% ongoing projects) stood at Rs production facilities in the US of the world affecting a few
71.7 lakh crore at the end of FY20 FY21 April May June July August September October November December and Japan. The demand-side agricultural commodities and
Shipping Road Housing & Railways Heavy Jal Shakti Power 2021 2021 2021 2021 2021 2021 2021 2021 2021 reducing hydroelectricity
Transport & Urban Industries third quarter- higher than the factors include huge backlog
Highways Affairs Rs 69.27 lakh crore print seen Source: Ministry of Commerce & Industry of demand for chips due to supply while floods in other
Apr-Nov FY21 Apr-Nov FY22 in the same period in FY21 and the release of pent-up demand areas has impacted the supply
Rs 69.39 lakh crore seen in the of certain metals and coal.
Source: CGA amongst others.
pre-pandemic period of FY20.
13 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 14
QUARTERLY JOURNAL OF ECONOMICS
QUARTERLY JOURNAL OF ECONOMICS
DECEMBER 2021 DECEMBER 2021