There is a technical minutia needed to see the predictable 20.1% GDP growth that the National Statistical Office has shown from the right perspective. No, the base is not the period when India was hit by the second wave of the Chinese-origin coronavirus that spread Covid-19 across the world in 2020 and then mutated in various forms, the Delta Plus variant of which was the most devastating, troubling humanity anew. The base of the quarter concerned has to be the corresponding period of the previous year. Therefore, the leap in growth owes to the 24.4% shrinking of the national economy during the abrupt, but necessary, nationwide lockdown announced in March-end, 2020. It’s a sequential slowdown of 16.9% over the GDP of Rs 38.96 lakh crore in January-March 2021. It must be borne in mind that in early April, the Reserve Bank had forecast a growth of 26.2% for the April-June quarter. That was about six percentage points higher than the actual figure released yesterday. The GDP in the given quarter is thus lower than that recorded in the corresponding period of the pre-pandemic year, 2019. This is happening because of low aggregate demand while the government is, at regular intervals, making announcements that address primarily the supply side. Private consumption, which is picking pace, was Rs 17.83 lakh crore, higher by 19.34% from April-June 2020, but trailing the total rate of GDP growth. Sirf News calls the performance remarkable because the growth in fixed investment was massive, higher by 55.31% to Rs 10.22 lakh crore. The gradual relaxation in the restrictions then brought forth positive results, again predictably. Here, the Narendra Modi government deserves praise because, for seven years, it has been outstanding in launching projects of its own as well as clearing stalled projects of the ‘policy-paralysed’ final years of the UPA government. Thanking workers in all businesses, big and small, construction growing at 68.3% and manufacturing by 49.6% that contributed the most must be hailed separately. Cynics should be told that sectors of the economy like agriculture, forestry, fishing, electricity, gas, water supply and other utility services performed better than how they did in the pre-Covid year.
Where the union government needs to work on is expenditure. Consumption expenditure by the state was Rs 4.21 lakh crore in April-June, which is lower than Rs 4.42 lakh crore in the corresponding period of 2019 but higher than Rs 3.92 lakh crore in April-June 2019-20. From a position of a standstill, all sections of the economy can look up only with increased spending. In the short run, John M Keynes’ theory will work to rejuvenate the market. A measure of consumer spending, the Private Final Consumption Expenditure grew 19.34% and a measure of private investment, the Gross Fixed Capital Formation increased 55.26%. But spending in the manufacturing and construction sectors was lackadaisical. Consumer spending and private investment — lower by 11.9% and 17.09% respectively compared with the first quarter of 2019-20 — must look up too. The revenue and fiscal deficits being just 15-18% of the annual target till end-July, fiscal and monetary policies are not playing out in mutual harmony. The nation still does not know how bad a hit the informal sector has taken. A stern national lockdown will not be repeated, players in the market are assured.
Whether people are feeling an amelioration in their lives can be gauged from the gross value added. Net product taxes subtracted from the GDP, the GVA shows the growth in supply, which was 18.8% in April-June as against a contraction of 22.4% the previous year. Counting inflation, GDP in nominal terms grew by 31.7% in April-June as against the 22.3% contraction last year. So, if public memory is short, they must have felt their lives improving. Indian economy in the foreseeable future will be even better, given that high-frequency indicators project a greater recovery in the second quarter, which further relaxing state-wise lockdowns and public confidence arising from the rapid vaccination coverage will ensure.