Q1 GDP Growth is Most Welcome But is Not Enough! Demand Should be Boosted!

  • In between the first and second Covid wave, there were many concerted steps initiated by the Government of India to pull back the stuttering economy from the brink on the back of stringent national lockdowns. The debilitating effect of the lockdowns on the economy as well as citizens is done to death by now. Hence, many of those fiscal measures aimed at resurrecting the stalled economic activities offered hopes of a revival. As the second Covid wave struck the country with such ferociousness and brutality that it only ensured further plunging the already tattered economy into even more uncertainty. It became evident the hardships are not going to be addressed in a jiffy as the raging virus mercilessly went about ruining everything along the way.

PC: Macroeconomic influencers

  • As if on cue, more fiscal stimulus packages were announced by the Union Finance Ministry to mitigate the economic challenges which appear to have had limited success going by the way GDP is evolving over the period. A marked departure from the national lockdown imposed in the first wave to local lockdowns at the discretion of the state government depending on the infection rates is proving to be a decisive factor in the way the economy is looking up after reporting negative during the last financial year. Against this backdrop, it is heartening to note that the GDP during the April-June quarter grew 20.1% thereby unambiguously indicating the Indian economy succeeded in weathering the surge in Covid cases during the second wave quite well.
  • The mentioned growth would indicate how crucial it is as compared to last year largely owing to localized lockdowns minimizing dislocation of businesses and workers allowing for the activities to continue with lesser restrictions. Consequently, all segments, especially construction and manufacturing, recorded high growth rates amplifying how infrastructure is so crucial to sustaining economic ascendancy. Note that construction grew 68.3% and manufacturing by 49.6%. On the flip side, a measure of the likely cost of the second wave could be seen in the difference between RBI’s forecast in early April and the data released recently. The RBI had forecast GDP growth of 26.2% in the April-June quarter in early April, about six percentage points higher than the final result.

PC: Tehran Times

  • Of course, what has been recorded in the first quarter now is still lower than that recorded in the corresponding period of the pre-pandemic year, 2019. Not difficult to comprehend the possible reasons as aggregate demand continues to be lackluster courtesy of private consumption lagging the overall growth rate. Contrastingly, the fixed investment has witnessed a huge growth of 55.31% to Rs. 10.22 lakh crore as the Government of India is leaving no stone unturned in pushing ahead with its various projects. Note that quarterly GDP data tends to underestimate the hit to the informal sector during a shock and India has a considerable chunk of the same. It also means the data projections fail to accommodate informal projections. Nonetheless, some more prudent moves including releasing a tight leash on expenditure should be adopted by the Government. Need to move on from here on.

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Krishna MV
Krishna is a Post Graduate with specialization in English Literature and Human Resource Management, respectively. Having served the Indian Air Force with distinction for 16 years, Armed Forces background definitely played a very major role in shaping as to who & what he is right now. Presently, he is employed as The Administrator of a well known educational institute in Bangalore. He is passionate about sharing thoughts by writing articles on the current affairs / topics with insightful dissection and offering counter / alternate views thrown in for good measure. Also, passionate about Cricket, Music – especially vintage Kannada & Hindi film songs, reading – non-fictional & Self-Help Books, and of course, fitness without compromising on the culinary pleasures.