India Q1 GDP Data (2021-22)

Why in news?

Ministry of Statistics and Programme Implementation (MoSPI) released the GDP data for the first quarter of the current financial year (2021-22)

What are available data for Q1?

Growth - Lockdown due to the pandemic had nearly halted all economic activities in April-June 2020. (GDP had contracted 24.4%).
But the economy grew at a pace of 20.1% in April-June 2021 compared to April-June 2020.
GVA grew by 18.8%
This high growth rate has come despite a brutal 2^nd wave of in April-May 2021.

Characteristics - Certain high frequency indicators such as power generation, fuel consumption and railway freight indicated that rebound has been faster after Covid 2.0 than Covid 1.0.
However the pace of recovery is still considered slow.
GDP in absolute terms at Rs 32.38 lakh crore (constant prices) is still 9.2% lower than the GDP in pre-pandemic time.
Sectors - Manufacturing and construction imparted a significant push to the economy growing at 49.63% and 68.3% respectively.
But they are yet to reach the levels of the 2019-20.
Services, especially contact-intensive sectors, however, continued to lag.
Agriculture, forestry and fishing’ and ‘electricity, gas, water supply and other utility services are above the levels of the of 2019-20.
In terms of expenditure, Private Final Consumption Expenditure grew 19.34%, and Gross Fixed Capital Formation jumped 55.26%.
Private Final Consumption Expenditure - measure of consumer spending
Gross Fixed Capital Formation - measure of private investment

What are the reasons?

The sharp increases were largely due to the low base of the first quarter of 2020-21.
The recovery is likely to deepen with further easing of curbs and faster vaccination.

How is the growth seen by experts?

Chief Economic Adviser - GDP data for the 1^st quarter reaffirms the government’s prediction of an imminent V-shaped recovery made last year.
Others - The headline number cannot be interpreted as a V-shaped recovery.
2019-20 level was in itself seen as a disastrous year for growth.
And the the fact that the economy has still not recovered to those levels is not good news.
The 2^nd quarter numbers would be the real test of the shape of the recovery.

What does this call for?

As the growth is below the RBI’s projection of 21.4%, it will maintain status quo on key policy rates
A full economic recovery would require the support of both fiscal and monetary policies
From a policy perspective, recovery requires fuller levels of vaccination and improved public confidence

GDP vs GVA

GDP- GDP is the total monetary value of final goods and services produced in a country in a given period of time
It measures the value of total output in the economy by tracking the total demand
GVA - GVA looks at how much value was added (in money terms) in different productive sectors of the economy
It tracks the total output in the economy by looking at the total supply
The total output calculated by GDP and GVA should be the same but every economy has a government which imposes taxes and also provides subsidies, thus

GDP = (GVA) + (Taxes earned by the government) — (Subsidies provided by the government)

If the government earned more from taxes than what it spent on subsidies, GDP will be higher than GVA
If the government provided subsidies in excess of its tax revenues, GVA would be higher than GDP

Source: The Indian Express