GDP growth of 8.4% in Q2

GDP growth of 8.4% in Q2

Part of: Prelims and GS-III- Economy

In News: India’s gross domestic product (GDP) grew by 8.4% in the July to September quarter, compared to a 7.4% contraction a year ago, with the economy’s gross value added (GVA) rising 8.5%, the National Statistical Office said on Tuesday. 

• Factoring in the first quarter GDP growth of 20.1%, the first half of this year has recorded 13.7% growth and India is likely to record double digit growth for 2021-22 as a whole.
• It shows that the recovery process is continuing to play out.
• Economists, however, were not fully convinced about the extent and durability of this recovery and reacted with caution. 
• Though the absolute GDP in the second quarter (Q2) was 0.3% higher than pre-pandemic levels, there were still many worrying areas.
• In particular, the insipid private consumption spending that still lagging below pre-COVID levels along with activity in employment-intensive sectors like construction and contact-intensive sectors like retail and hotels. 
• The base effect of negative growth last year also helped nudge the GDP numbers up.
• Investments, largely from the Government, continued to remain the key growth drivers while private consumption is yet to show a decisive recovery. 
• On the domestic demand side, only gross fixed capital formation emerged positive in Q2 over the 2019-20 level.
• Even if the pace of recovery is sustained in the next two quarters, India’s GDP for the year is expected to be only marginally higher than that in 2019-20 (by around 2%),” 
• Improvements in Demand and investments are expected to be limited and gradual given that even before the pandemic, the domestic economy was grappling with slowdown.