Despite a severe heatwave that reduced wheat yields and the agricultural ministry lowering its cotton harvest expectation in the latest estimate announced earlier this month, the farm and allied sector grew by 4.1 percent in the March quarter and remained a bright spot in the GDP numbers.
However, a slight and inconducive contraction in manufacturing in the fourth quarter of FY22 does not speak well for the promise of a swift and sharp reversal in private spending.
In the first months of the last quarter, manufacturing growth slowed to 0.2 percent, compared to 0.3 percent the previous quarter, due to high input costs, complex global supply chains, and Covid-induced mobility restrictions.
Furthermore, manufacturing contracted as expected, according to Kunal Kundu, India economist at Societe Generale, but "a larger inventory build-up signals weaker demand."
The change in stocks, which remained negative in FY21, increased dramatically in FY22, reaching Rs 51,450 crore in the March quarter.
The rise in interest rates, the unabated rise in commodity prices (Brent crude oil has risen to $120 per barrel), and the continuance of supply-chain problems all threaten manufacturing prospects in the current fiscal year.
Furthermore, the base effect may provide some relief in the first quarter (despite sharp year-on-year growth in Q1FY22, manufacturing was only marginally higher than in the same period of FY20).
Given the severe impact of irregular weather on crops in March and April, several analysts foresee a small downward revision in the growth estimate for the March quarter later.
However, the prognosis of a regular monsoon, its arrival over the Kerala coast ahead of schedule, and the expectation of favorable geographical distribution have boosted optimism for another bountiful harvest in the crop year beginning in July.
