The Indian economy resumed on the path of recovery as it surpassed its pre-COVID levels in Q2 FY22. There was a robust sequential pick-up in the real GDP driven by private consumption, exports, and investment (led by government CAPEX). On the supply side, real GVA growth was driven by services and industry, while agriculture continued its good momentum. High-frequency indicators suggest a pick up in economic recovery in Q3 aided by progress on the vaccination front, controlled COVID situation, and festival demand. We maintain our real GDP growth projection of 10.5% YoY in FY22; however, note potential downside risks emanating from a possible resurgence in COVID cases along with sustained inflationary pressures and supply-side bottlenecks.
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