Also, it is important to compare GDP data with the pre-pandemic 2019 era to understand the extent of recovery. GDP at constant (2011-12) prices in the second quarter of 2021-22 is estimated at Rs 35.73 lakh crore. This figure is slightly higher than the GDP of Rs 35.61 lakh crore in the second quarter of FY 2020 and Rs 35.66 lakh crore in the first quarter of FY 2020. Experts say sectors that were in the deep red due to the shock from the COVID-19 pandemic are bouncing back, but continued recovery will require more financial support.
Dive deeper into GDP data
According to Sachchidanand Shukla, Chief Economist, Mahindra Group, agriculture growth at the sector level has been good. “Even sectors like construction and trade, hotels and services are bouncing back and approaching pre-pandemic levels,” Shukla told TOI. “This is important because these sectors are major providers of jobs at the grassroots,” he says, adding that he is also buoyed by the government expenditure numbers.
Ernst Young’s chief policy advisor DK Srivastava feels that the economic recovery is healthy and looking in the right direction.
“So far in the first half we are in deficit on GDP, if one compares the first half of FY20. However, if the growth remains strong, then we are in deficit in FY 2012 as compared to FY 2012 in terms of GDP. We expect a complete recovery in sectors like construction, trade, hotels and services in the coming quarters,” he tells TOI.
Where is GDP growth headed?
Experts believe that India’s GDP growth rate for the entire financial year will be around 9.5 percent. “If the government continues to support on the fiscal side, with a focus on capital expenditure from higher tax collections, and there is no major impact from the new COVID version, we expect GDP growth of around 9.5% for the full year. Do it,” says Srivastava.
Shukla of Mahindra Group also stresses the need for fiscal and monetary policy support. “Given the K-shaped recovery we are witnessing and the latest bout of uncertainty and fear caused by Omicron, the government should continue to support growth. It has substantial leeway as tax collections have surprised positive and The GST collection is also expected to be buoyant.” he believes.
Shukla feels that the RBI will likely continue with its supportive growth stance and not hike the repo or reverse repo rate this fiscal. “We expect GDP growth of 9.5% for the full year, although the proliferation of new forms could pose some potential downside risks,” he said, adding that gross fixed capital formation will play an important role in continued economic recovery. Will fulfill
What about broad-based recovery?
Yes Bank Chief Economist Indranil Pan believes that if one looks at the expenditure side of the GDP picture, the story tells a different story. Private Final Consumption Expenditure (PFCE) and Government Final Consumption Expenditure (GFCE) are still well below Q2 FY20 levels. While the share of PFCE in GDP is 54.5%, that of GFCE for Q2 FY22 is 10.1%.
PAN also points out that even though gross fixed capital formation is in positive territory, the cumulative numbers Q1 and Q2 FY22 are still lower than Q1 and Q2 of FY20.
“Data suggests the recovery is K-shaped and not comprehensive. The informal sector is hurting and the GDP growth numbers projected for this fiscal at 9.5% look good, the growth is not the same,” he told TOI tells to. ,
According to the Chief Economist of Yes Bank, another data point that is interesting is the “Values” which have shown a growth of 170% in Q2 FY20. As defined by the Ministry of Statistics, valuables are expensive durable goods that are purchased in the hope of increasing their prices. This includes jewellery, works of art, precious stones etc. “This indicates the discretionary nature of consumption and therefore cannot be classified as productive consumption,” he says.
EY’s Srivastava believes the manufacturing sector needs to pick up more and achieve a growth potential of over 8% to make the recovery more broad-based.
Shukla says that the real GDP may have crossed the figure for the first quarter of FY 2020, but in the interim it has come after 7-8 quarters. “That fatal loss cannot be recovered,” he feels.
NS Indian Economy Certainly, there are signs of recovery from the COVID-19 induced economic shock. Higher frequency indicators such as IIP, PMI and core sector data also point to an improvement in economic sentiment. However a sustained economic recovery will require all key sectors to bounce back to pre-pandemic levels.
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