Economy not up to pre-pandemic levels despite 20.1% GDP growth, say experts
The growth rate in the first quarter was built on a low base after an unprecedented contraction of 24.4% in the first quarter of the previous financial year.
Former Finance Minister P Chidambaram on Tuesday pointed out that even though India’s Gross Domestic Product registered a 20.1% growth rate in the first quarter (April-June) of this financial year, the economy was yet to recover.
“In Q1 [first quarter] of 2021-22, GDP was Rs 32,38,828 crore which is still below the Q1 level of 2019-20 which was Rs 35,66,788 crore,” the senior Congress leader tweeted.
GDP numbers for Q1 of 2021-22 are very revealing
— P. Chidambaram (@PChidambaram_IN) August 31, 2021
In Q1 of 2021-22, GDP was Rs 32,38,828 crore which is still below the Q1 level of 2019-20 which was Rs 35,66,788 crore
India’s growth rate, which was already slowing down before the pandemic struck, slumped to unprecedented lows last year as economic activity in the country stalled due to a nationwide lockdown. For the financial year 2020-’21, the Indian economy contracted by 7.3%, the sharpest annual decline in growth rate ever.
On Tuesday, Chidambaram said that sectors such as mining, manufacturing, construction, hotels and transport and financial services were yet to attain pre-pandemic levels of quarterly output.
Among the sectors that have not attained the pre-pandemic level are Mining & Quarrying;
— P. Chidambaram (@PChidambaram_IN) August 31, 2021
Manufacturing; Construction; Trade, Hotels & Transport; and Financial & Professional Services
Earlier on Tuesday evening, government data showed that the economy had grown by 20.1% in the April-June period compared to the corresponding quarter last year. The number marked the fastest rate of growth in India in a quarter. However, it came as an effect of a low base of an unprecedented contraction of 24.4% in the economy in the first quarter of the previous financial year.
Economic data like GDP growth rate are calculated on a year-on-year basis. So, a low growth rate in the previous year leads to a low base for the current year’s numbers.
In a separate set of tweets, Chidambaram highlighted this as well.
That means that in the first quarter of this year, we have not fully recovered from the decline of last year.
— P. Chidambaram (@PChidambaram_IN) August 31, 2021
Other economists and experts also chose to look beyond the headline number for GDP growth rate. Parag Kar, vice president of government affairs at Qualcomm, pointed out that the size of India’s economy in the first quarter was in fact smaller than the corresponding period four years ago.
Indian GDP Q1 2012
— Parag Kar (@Parag_Kar) August 31, 2021
The real meat is not in the growth % from the previous quarter. The story is that we have been able to match the GDP number of the same quarter what it was in 2017, which is 4 years back in time.#IndianGDP pic.twitter.com/WxMQ1VOOUE
Aditi Nayar, chief economist at ratings agency ICRA, said that the economy had slowed down 16.9% compared to the fourth quarter (January-March) of the previous financial year, BloombergQuint reported.
Radhika Rao, economist at the DBS Bank, also said that the impact of the second wave of coronavirus was better reflected in the quarter-on-quarter contraction in economy.
The data released by the Ministry of Statistics and Programme Implementation also showed that the country’s GDP in the April-June quarter of this financial year rose by Rs 51.2 lakh crore. It had grown by Rs 56.8 lakh crore in the fourth quarter of the previous fiscal.
Sreejith Balasubramanian, economist at financial services firm IDFC AMC, said that the vaccination process against coronavirus will be crucial for the growth trajectory going forward, Reuters reported.