- This shows the hard times are still not The preceding two years have been extremely challenging for the economy of every single country around the world needs no elaboration. The pandemic’s debilitating effects were so horrendous on the economy that it will take more time to recover. To further destabilize the already fragile economy, the Russian invasion of Ukraine came at a particularly bad time leading to huge disruptions in the global supply chains. The Indian government deserves credit for ensuring the nation does not follow in the footsteps of some other countries that have taken the maximum hit from the economic slowdown. Of course, the inflationary trends have breached the danger zone set by the Reserve Bank of India but are showing signs of slowing down as per the reports.
PC: D. K. Srivastava
- It is still heartening to note India’s GDP for the April-June quarter grow 13.5% to Rs 36.85 lakh crore, even though 2.7 percentage points lower than what RBI had forecast. To an extent, the growth rate was influenced by an upward revision in the numbers of the corresponding period of the previous year. Despite the lower-than-expected growth rate, there were positive developments as well. Note that GDP in the April-June quarter is above the corresponding pre-pandemic period, indicating the economy has recovered at an aggregate level from the Covid shock. Further indications of this come from the data that both private consumption and investment have surpassed their pre-pandemic levels.
- However, looking from the sectoral terms, the result can be termed as mixed at best. Let’s look at why the result is mixed. For one, contact-intensive sectors represented by trade, hotels, and transport haven’t recovered fully, and their output remains below the 2019 level. Consequently, this segment slipped in its relative contribution to the economy’s gross value added– it’s 16% in the April-June quarter of 2022 as compared to 20% in the corresponding period of 2019. It’s a troubling feature of the recovery as contact-intensive sectors are an important source of employment among less-skilled job seekers. The key question is whether the job situation is changing on the ground for this particular segment.
PC: Suresh Seshadri
- The Union Government’s quarterly urban jobs data show that the urban unemployment rate for the April-June quarter was 7.6%. For sure, it’s high for an emerging economy but the rate has trended downwards over four successive quarters. Nonetheless, good news in the first quarter won’t help with challenges going forward. Apart from RBI’s change in monetary policy acting as a drag, rising crude oil prices over the last fortnight will push up input costs across the board. Thus, the damage to contact-intensive sectors and elevated crude prices suggest the recovery in demand is still fragile. It becomes incumbent for the GOI to tweak the fiscal expenditure pattern to provide support to some sectors on the back of a cushion provided by a 25% increase in gross tax revenue in the April-July period behind us for sure.