GDP numbers: Showcasing a surge but not quite the strong positive leap out of the abyss

The key linknode across the GDP numbers released on Tuesday, is the low base effect.

The much-awaited Gross Domestic Product (GDP) numbers for the first quarter of the current year are out and as against the expectations among most that the economy may show signs of strong recovery, the numbers still do not seem to provide enough comfort to celebrate.

At one level, one could argue philosophically as to how do numbers matter at a time when there is a pandemic that has yet to be contained and people suffering? Also, what can numbers mean if the views on the current state of the economy are undergird by perception of rich getting richer and the poor still struggling.

But then, numbers are crucial to get a fix on what is right and wrong on where the economy is headed and how some of its co-morbidities that it had inherited even before the pandemic are playing out. The most significant among these was depressed demand and slipping consumer spending.


First the headline number: the GDP at constant (11-12) prices in Q1 of 2021-22 is estimated at ₹ 32.38 lakh crore, as against ₹ 26.95 lakh crore in Q1 of 2020-21, showing a growth of 20.1 percent as compared to contraction of 24.4 percent in Q1 2020-21. Then, the GVA (which is the Gross Value Added) and a measure of output that is arrived at when the GDP number is adjusted for the impact of indirect taxes and subsidies: the quarterly GVA at basic price at constant (2011- 12) prices for Q1 of 2021-22 is estimated at ₹ 30.48 lakh crore, as against ₹ 25.66 lakh crore in Q1 of 2020-21, showing a growth of 18.8 percent.

Financial Express Online spoke to some experts to get their immediate response to the numbers and what to make of the highest ever growth in the GDP numbers that India has posted in a quarter since the pandemic began unfolding.

The ‘Strongly Positive’ Imperative

Industry seems happy about any number that falls in the positive territory. But in the current context, it is the strength of the positive numbers that seem to matter more. Encapsulating both the hope and the concern, industry veteran Naushad Forbes, the co-chairman of Forbes Marshall and the former president of the Confederation of Indian Industry (CII) says: “The Q1 numbers were expected to be strongly positive. The Plus 20 per cent growth over the last year’s minus 24 per cent still means we are well below the Q1 numbers for 2019-20. We need to see continued strong positive growth to get us back to above where we ended 2019-20 and then on to positive territory.”

In absolute terms, the GDP numbers just released do seem positive indicators of a growth and at first glance almost temptingly suggesting a bounce back. But then the way to look at these numbers is to compare them with the pre-pandemic picture in 2019-20, says Professor Biswajit Dhar, professor of economics at the Jawaharlal Nehru University and one who has been tracking the economy and the challenges it has been dealing with even before the virus, its variants and their sub-lineages upended our lives.  And even when the pandemic eventually abates, scientists already tell us that the virus will still survive and therefore the shape the economy is taking will matter even more in the days and months ahead.

He cautions that the 20.1 per cent growth posted in the first quarter should not lead us into any complacency that we are now on a high growth path for the various elements that make these numbers still show some concerns. “The problem of job losses continues, there is clearly inadequate recovery of the labour market and this is getting reflected in the trends in the ‘private final consumption expenditure’. While, it has improved from 2020-21 to 2021-22 that is up from Rs 14,94,524 crore to Rs 17,83,611 crore. It is still short of the Rs 20,24,421 crore in 2019-20. The problem of depressed demand continues and it is fundamental problem, he feels that needs to be addressed. This can only be with more jobs, higher incomes and greater consumer confidence.

On manufacturing, a touchstone for many as one of the key indicators on recovery, again here, the numbers are less than in 2019-20 and it is not as if 2019-20 was an ideal growth year for manufacturing. It was already seeing slipping demand.

Beyond The Base-Effect

The key linknode across the GDP numbers released on Tuesday, is the low base effect. Compare 20.1 per cent growth in the first quarter to a 24.4 per cent contraction in the similar quarter of the previous year. Going by this count, Professor Dhar feels, if the economy had to correct what was lost and also regain lost ground then ideally, the growth this quarter ought to have been of the order of over 30 per cent and we are still way short of that. That cannot be a source of comfort for an economy that is nursing ambitions of getting to be 5 trillion dollar economy and an economic powerhouse in the next five to six years.

Hurt Badly in April & Global Supply Chains Still Hit

But then, striking a positive tone to what has been achieved when seen from a global supply chain challenges, Kiran Mazumdar-Shaw, Chairperson, Biocon, says, “what we all need to recognise is that we were all hit very badly by the second wave, especially during the month of April and therefore this 20.1 per cent growth is a move in the right direction and to achieve this at a time when the global supply chains continue to be hit, is a good sign.” On the way forward, she would want to watch another two quarters to conclusively tell where we are headed and if we could draw enough comfort to really celebrate an economic recovery.


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