India GDP Grows By 20.1 % In Q1 Due To Weak Base Last Year Amid COVID-19 Pandemic

The Gross Domestic Product (GDP) of India grew by 20.1% in the first quarter of 2021-2022 financial year (FY.)

According to the National Statistical Office (NSO,) the Gross Value Added (GVA) in the economy during the April to June period increased by 18.8%. In the previous FY (2020-2021,) the rate was 22.20 %.

Compared to the 24.4% contraction recorded in the same quarter a year ago, economic activity remained well below pre pandemic levels due to the second wave of COVID-19.

While most of the economic sectors were functional, agriculture, forestry and fishing sectors were normally active with GVA growth of 4.5 % from the previous year’s 3.5 %. Besides agriculture, forestry and fishing electricity, gas, water supply and other utility services, GVA also grew 14.3% in Q1 of 2021-22, compared to a 9.9% fall last year.

Also, construction and manufacturing GVA recorded a 68.3% and 49.6% uptick between April and June this year, compared to a 49.5% and 36% contraction, respectively, last year. GVA from trade, hotels, transport, communication and services related to broadcasting recorded a 34.3% jump after dipping 48.1% in the same quarter last year.

Though these industries recorded a rise in the GVA, employment and contact intensive services sector was still 30.2% below 2019-20 levels.

In addition, the overall GVA in Quarter 1 is still lower at 7.8% and the GDP is at 9.20 %. It is to be noted, the economic situation of India was badly disturbed by the Wuhan virus pandemic, which broke out in December 2019. Due to the nationwide lockdown in March 2020, the travel and tourism industry, food industry and other business establishments suffered a huge loss with no income. Although the GDP of India grew by 20.1 % in Q1, the economic situation is yet to recover from the losses and return to normal activity levels before the pandemic broke out.

Mr. Ashok Sheel, the Chair Professor of the Reserve Bank of India (RBI,) shared his opinion and said, “The spectacular headline number cannot be interpreted as a V-shaped recovery. The fact that the economy has still not recovered to the 2019-20 level, which was in itself seen as a disastrous year for growth, is not good news.”

Another economic expert Mr. Madan Sabnavis said, “The share of consumption in GDP was lower this time which indicates that the second wave and lockdowns impacted households more than the first wave.”

In addition, economic expert Ms. Aditi Nayar said, “The growth rates in 2021-22 in some cases are unduly high due to the low base.”

The Ernst and Young Global Limited (EY) India Chief Policy Advisor Mr. D.K. Srivastava, said, “The main disappointment comes from the contribution of the government sector, both from the demand and output sides.”

The growing GDP in 2021-2022 FY is due to the low base GDP recorded in 2020-2021 due to the pandemic of the Novel Coronavirus (COVID-19.) However, compared to the pre pandemic era, the GDP of India is low, raising concerns for economists in India.

Meanwhile, it is to be noted, the RBI projected GDP for Q1 2021-2022 was 21.4 % April-June. However, the recorded GDP is 20.10 % at 32.38 lakh crores.