A closer look at recent data on GDP shows that the numbers are flawed and recovery is incomplete.
What about the GDP growth in India?
The National Statistical Office (NSO), Ministry of Statistics and Programme Implementation, has released the Provisional Estimates of National Income for the financial year 2020-21.
It shows that GDP grew 8.7% in real terms and 19.5% in nominal terms making India the fastest growing major economy in the world.
Further, the real economy is 1.51% larger than it was in 2019-20, just before the novel coronavirus pandemic hit the world.
The picture implies almost no growth and high inflation since the pre-pandemic year.
What is the implication with the tag “the fastest growing economy”?
Fall and rise of economy- If an economy drops sharply and then rises equally fast to reach its earlier level, that cannot be taken as an indication of a rapidly growing economy.
Price rise- Price rise and impact on production are likely to persist.
The rapid rise in prices will impact demand from the vast majority of citizens who are losing out reducing the growth further.
Correctness of data- Very little data are available for quarterly estimates and even less is available for the unorganised sector.
Since the same method is used to estimate the annual growth rate the errors get repeated.
If GDP data are incorrect, data on its components - private consumption and investment must also be incorrect.
Errors- The method using the organised sector to proxy the unorganised non-agriculture sector may have been acceptable before demonetisation (2016) but is not correct since then.
Large parts of the unorganised non-agriculture sector have experienced a shift in demand to the organised sector and this introduces large errors in GDP estimates since official agencies do not estimate this shift.
