Remember The V-Shaped Graph From Economic Survey 2020–21?
We all saw this cover picture of Economic Survey 2020–21, Volume 1, right? It was a graph of hope & resilience. So what’s happening rn?
To understand the current state, in this article I am employing an article written by C.Rangarajan & D.K.Srivastava in The Hindu titled, “What the Q1 GDP numbers say”.
I will try & keep deciphering the economic terms so that you can keep following what’s going on. Cheers!
Ministry of Statistics & Program Implementation (MoSPI) Released GDP Data
MoSPI recently released its data on GDP for the first quarter of the fiscal year 2021–22 (a period of twelve months over which the accounts and taxes of a company or person are calculate).
This data is released every year, for four quarters. This exercise is necessary as it helps in assessing the economy’s current health & wellness.
So, what does this data contain exactly? Glad you asked.
When MoSPi releases the data, they share two points, namely- GDP & GVA, as illustrated in the image.
From the image, it can be understood that GDP or Gross Domestic Product is a measure of economic growth from the demand side whereas GVA or Gross Value Addition is measure of economic growth from supply side.
Between GDP & GAV lies what we all dread but shouldn’t- tax :D
So government applies taxes on stuff we buy but also gives subsidies to people. Thus, the formula.
So, government IS responsible for the GDP.
Still with me so far? Alright then. Now let us first look at the Q1 data.
The Q1 Data: A Good News?
The latest data shows that India’s GDP grew by 20.1% while the GVA grew by 18.8% in the first quarter of 2021–22.
That’s great news, right?
Ummm, not really. Many economists & observers are asking, “Well, aren’t be going to talk about the low base here amigos?”.
That’s the key, low base!
These numbers should be seen in the light of last year’s comparison.
In Q1 of the last financial year, India’s GDP contracted by 24.4% while GVA was contracted by 22.4%
Do a simple comparison now. Not so good now, is it?
No V-Shape Recovery, Unfortunately!
Yes the numbers look great but unfortunately we haven’t been able to follow the V-Shape curve as intended. There are more nitty gritty to these numbers if we go deeper into the concept of GDP and what drives its growth such as Private Financial Consumption Expenditure but that is out of the scope for this article.
Thus, the economic numbers must always be seen in context.
That’s all for today folks!
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I will be coming up with new materials & hopefully a newsletter soon. Remember, future is interdisciplinary.
