Spotlight Sep 1: DISCUSSION ON “RECORD GDP GROWTH IN 1ST QUARTER”
- GS-2: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
Economic Growth in First Quarter of FY22
- India’s GDP grew at a record pace of over 20 per cent in the first quarter of FY22.
- GDP in the first quarter of 2021-22 at constant (2011-12) prices is estimated at Rs 32.38 lakh crore, as against Rs 26.95 lakh crore in the first quarter of 2020-21, showing a growth of 20.1 per cent as compared to a contraction of 24.4 per cent in the first quarter of 2020-21.
- The economy grew 20.1 per cent in the first quarter of this financial year in comparison to the same period a year ago when the economy contracted 24.4 per cent.
- This is the fastest quarterly expansion of GDP since official growth data was stored from the mid-1990s.
- Quarterly GVA at Basic Price at Constant (2011-12) Prices for Q1 of 2021-22 is estimated at Rs 30.48 lakh crore, as against Rs 25.66 lakh crore in Q1 of 2020-21, showing a growth of 18.8 per cent.
- While GDP growth has rebounded at a record pace in the April-June quarter, it is yet to reach 2019 levels.
- Ratings agency ICRA had earlier said that the high growth in the first quarter of this fiscal would be “deceptive” due to the sharp contraction in the corresponding period a year ago.
Factors contributing to the quarterly expansion of GDP:
- India’s GDP grew at a record pace of over 20 per cent in the first quarter of FY22 is an offshoot of low or a weak base.
- Second reason behind the expansion is the strong rebound in consumer demand in comparison to the same period in 2020-21.
Comparison in growth of 2019-2020 and 2020-2021:
- In the year 2020, the GDP had contracted at the same quarter. Due to the lockdown, India faced contraction in last year’s GDP as all the sectors were halted as a measure to combat Covid-19.
- The Covid-19 pandemic had nearly halted all economic activities. The GDP had contracted 24.4 per cent in April-June 2020.
- Another learning from this is that the second wave was very virulent as far as the healthcare system is concerned but the economy was not that badly impacted. So, there is underlying learning to live with the virus phenomenon which seems to be playing out and which will play out in rest of this fiscal as well.
Achieving the pre covid growth rate:
- The high GDP growth numbers are mainly on account of the base effect. The level of the GDP in 1QFY22 is still lower than the level recorded in 1QFY20.
- However, the rebound after the second wave has been faster in some sectors. The recovery is likely to deepen with further easing of curbs and faster vaccination.
- Going forward, high frequency indicators point to a deepening recovery in the second quarter, driven by the easing of state-wise restrictions and rising confidence on the back of widening vaccination coverage.