Indian economy recorded growth of 8.4% in its GDP (Gross Domestic Product) for the quarter ended Sept\u201921 (Q2\u2019FY22) as per the data released by MOSPI (Ministry of Statistics and Programme Implementation) today. The performance looks quite promising especially because the growth segments have managed to make up for the decline witnessed by the sectors still under stress. However, government expenditure, which acts as a counter-balance for private expenditure, has recorded significant fluctuations since the beginning of pandemic, ranging from increase of 28% to decline of 24%. This is possibly a result of conflicting objective of managing growth vs managing fiscal deficit, yet government would have to take a longer term view until the economy stabilizes. Here is a brief analysis of GDP and its constituents.<\/p>\n
As per the MOSPI release, Indian economy recorded GDP of Rs 35.7 lakh crore during July-Sept\u201921 quarter (referred as Q2 henceforth<\/em>) against Rs 33.0 lakh crore a year ago (constant prices, 2011-12 base). In comparison, GVA (Gross Value Added) stood at Rs 32.9 lakh crore against Rs 30.2 lakh crore a year ago, almost the same level of growth. The growth in GDP assumes significance as it is reasonably higher than RBI projection of 7.9%. Further the absolute value is marginally higher than the value in Sept\u201919, the pre-pandemic year, in contrast with previous quarter (April-June\u201921) when the absolute value was 9.2% lower than June\u201919 figure. However, two out of the eight different segments are still below their value before the pandemic, the K shaped recovery conundrum.<\/p>\n Sectoral Analysis –\u00a0 <\/strong><\/p>\n GDP of the economy is calculated by estimation of GVA (Gross Value Added) for eight sectors \u2013 Agriculture, Mining, Manufacturing, Electricity (& other utilities), Construction, Trade (hotels, transport etc), Financial (real estate & professional services) and Public Administration (& defence etc). To this, net government tax (tax collection minus subsidy outgo) is added to arrive at GDP.<\/p>\n In terms of sectors, Manufacturing, the most important sector in terms of employment generation, has recorded growth of 5.5% against a decline of 1.5% last year. This is quite a remarkable recovery as the manufacturing GDP is now nearly 4% higher than 2019. The revival of manufacturing sector is critical to absorb blue collared workforce of the nation. Construction, another important sector for employment generation, grew by 7.5% and has almost reached the 2019 figure on absolute terms (marginally lower at 0.4%). Public administration, largely government expenditure, grew by sharp 17.4% and is higher than 2019 now by 6.5%.<\/p>\n However, \u2018Trade, Hotels, Transport etc\u2019 and \u2018Financial, real estate & professional services\u2019 remain under considerable stress. Financial services group grew at 7.8%, lower than the decline of 9.1% recorded previous year and remains at about 2% lower than 2019. The performance of this segment looks quite intriguing as all sub-segments within this group have largely adjusted to the new normal and appear to be doing well. The biggest concern relates to Trade segment (Trade, hotels, transport, communication etc<\/em>) which managed growth of only 8.2% against decline of as much as 16.1% in the previous year. The segment remains at almost 10% lower value than 2019. The recovery of this segment is critical to address urban unemployment.<\/p>\n Expenditure Analysis – <\/strong><\/p>\n GDP is also calculated from the expenditure side and is equal to amount spent by the three segments \u2013 expenditure by households for consumption purpose called private final consumption expenditure (PFCE), expenditure by government called Government final consumption expenditure (GFCE) and expenditure on creating physical assets or investment called gross fixed capital formation (GFCF). Approximate share of the three were 56%, 11.7% and 31.2% in FY21. (The rest is exports minus imports, change in valuable etc).<\/p>\n PFCE remains quite lacklustre, growing at 8.6% and remains 3.5% lower than 2019. Even government expenditure (GFCE) has not taken off significantly, growing at 8.7% in contrast with sharp decline of 24% in the previous year. GFCE, which had peaked at Rs 4.4 lakh crore in June\u201920 quarter is down to Rs 3.6 lakh crore and is almost 16% lower than 2019 figure. Government seems to have tightened its belt to keep the fiscal deficit under check. Whether that is the right strategy or not remains debatable. Investments seem to doing some heavy lifting, growing by 11% and is higher by 1.5% over 2019. While private consumption expected to remain subdued because of job losses, risk aversion and holdback of expenditure by the middle class, government expenditure and exports would remain critical for growth momentum.<\/p>\n","protected":false},"excerpt":{"rendered":" Indian economy recorded growth of 8.4% in its GDP (Gross Domestic Product) for the quarter ended Sept\u201921 (Q2\u2019FY22) as per the data released by MOSPI (Ministry of Statistics and Programme Implementation) today. The performance looks quite promising especially because the growth segments have managed to make up for the decline witnessed by the sectors still […]<\/p>\n","protected":false},"author":8,"featured_media":14425,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[857],"tags":[],"class_list":["post-14424","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","membership-content","access-restricted"],"yoast_head":"\n