Economy Grows By Record: GDP growth in the first quarter of the fiscal year 2021-22 after the havoc of Kovid has been tremendous. The country’s economic rate jumped sharply to 20.1% in the June quarter. This is the record high growth in any quarter so far. GDP growth in the March quarter was 1.6%. In June last year, the growth rate was negative at 24.4%.
The Reserve Bank of India (RBI) had estimated the GDP growth rate to be 21.4% in the June quarter. Along with this, the growth forecast given by 41 economists surveyed by Reuters was an average of 20%. Real GDP growth has been close to this.
Base Effect was the Reason for the Sharp Jump in Growth
The reason for the sharp jump in growth rate was clearly the base effect. In such a situation, experts say that for a better picture, we have to look at GDP on a quarterly basis. It is a good thing that it is improving on a quarterly basis.
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The total GVA during the first quarter of this financial year stood at Rs 30.1 lakh crore. This is an increase of 18.8% over the previous fiscal year. But 22.4% less than two fiscal years.
GVA shows the total output and income of the economy. It tells how many rupees of goods and services were produced in a given period after taking into account the input cost and raw material price.
Fiscal Deficit 21.3% of Full Year Target
Here, between April and July, the fiscal deficit has reached 21.3% of the full year target. The fiscal deficit in the first four months of this financial year stood at Rs 3.21 lakh crore. This is known from the data released by the government. Economy Grows By Record.
During this, the government got Rs 5.21 lakh crore as tax, while it spent a total of Rs 10.04 lakh crore. Due to Kovid, this year the government has set a target of 6.8% for the fiscal deficit this financial year.
Mixed Reaction of Experts About the Growth Rate
The growth figures look spectacular, but they have disappointed some economic experts. Upasana Bhardwaj, Senior Economist, Kotak Mahindra Bank, said the growth rate is lower than his estimate of 21.7%. However, experts like DBS Bank, Singapore-based economist Radhika Rao have expressed satisfaction. He said that the growth rate has been according to his estimates.
Kotak’s Bhardwaj said that the economic activity started improving from July onwards and now it has picked up pace. Economic activities can accelerate further if vaccination is intensified. IDFC AMC’s Sreejit Balasubrahmanyam also says that considering the threat of the third wave, now everything depends on vaccination.
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According to Krishnamurthy Subramaniam, Chief Economic Adviser, the Google Mobility Indicator is indicating an increase in activity. He said that according to this high frequency indicator, the grocery activity has also come down to the level before Kovid. This means that there has been an increase in the movement of people to supermarkets, grain warehouses, farmer markets, medicine shops.
The Slowdown in Growth Started Coming Before Kovid
As far as economic growth is concerned, there was an atmosphere of lethargy before the Kovid. GDP growth in the March 2018 quarter had reached a top of 8.9%. After that, the process of decline in the growth rate started, it did not seem to stop. Economy Grows By Record.
In the June quarter, the GDP collapsed due to the lockdown caused by Kovid. In the first quarter of the last financial year, GDP growth remained in the negative around 25%. Growth was negative in the September quarter as well, but turned positive in December and has been steadily increasing since then.
If we look at the economic growth from another perspective i.e. GDP per capita, then from 1999 to 2019 it has become five times. GDP per capita shows how much each person contributes to the economy, how much economic prosperity is in comparison to others according to GDP.
What is GDP?
Gross Domestic Product (GDP) is the total value of all goods and services produced in a country in a given year. It is the biggest measure of economic development of the country. Higher GDP means that the country’s economic growth is progressing, more jobs are being created. It also shows which sector is growing the most and which sector is lagging behind economically.
What is GVA?
Gross Value Added (GVA). Simply put, it gives an idea of the total output and income of an economy. It tells how many rupees of goods and services were produced in a given period after taking into account the input cost and raw material price. It also shows how much production has been done in which sector, industry or sector. Economy Grows By Record.
From the perspective of national accounting, the figure obtained after deducting subsidies and taxes in GDP at the macro level is GVA. On the production front, it would appear to be a balancing item on the national accounts.
