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GDP grows by 20.1%, but the devil is in the details

Recovery has not been as sharp as the contraction last year

Representative-India-GST-rupee-federal-gdp-rupee-shutterstock Representative image | Shutterstock

As expected, India’s GDP (gross domestic product) grew by a massive 20.1 per cent in the first three months (Q1) of financial year 2021-’22. The data was released by the government on Tuesday evening, and shows India’s GDP at 32.38 lakh crore, against 26.95 lakh crore in the same period last year.

If you think it is too good to be true, it is. 

The high percentage makes sense in the backdrop of the nearly 25 per cent decline in the same period last year, due to the onset of the pandemic and the stringent national lockdown that was in place for most of the quarter in 2020. On the back of the low base, this quarters figure may seem impressive, but needs to be taken in perspective.

The picture looks rosy enough, from the initial looks of it. Q1 gross value added, or GVA stands at  18.8 per cent while nominal GDP growth was at 31.7 per cent, higher than even estimates by financial bodies. Manufacturing growth was at a healthy 49.6 per cent while construction growth was pegged at 68.3 per cent. Taking specific sectors, the crucial agriculture sector grew by 4.5 per cent while mining went up by 18.6 per cent. Consumption of electricity went up 14.3 per cent. 

However, there are worry lines galore. Though the numbers seem better, the recovery has not been as sharp as the contraction last year. This is primarily due to the unexpected brute force with which the second wave hit in the same period. Besides that, private consumption still remains down, while the public expenditure by the government is still lower than expected. 

But experts expect a steady surge from now on, on the back of the rapid pace of recovery and return to normalisation, and the picking up of vaccination. Optimism, too, has been at a high, with stock indices at an all-time high. The hotel, travel and transport segment, perhaps the worst affected by the first wave of the pandemic, showed the biggest year-on-year rise, at 68.3 per cent. It definitely helps that the impact of the second wave seems to be much less, though the delta variant, as well as a third wave, could ruin the best-laid plans.


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