Q1 GDP print shows economy on the mend, but worries remain

Our Bureau New Delhi | Updated on September 01, 2021

KV Subramanian, CEA   -  The Hindu

Govt hopes to reach pre-Covid levels by next fiscal, says CEA

Aided mainly by the base effect, the country’s economic growth expanded 20.3 per cent in the April-June quarter against a contraction of 24.4 per cent in the corresponding previous period. The GDP grew 1.6 per cent in the preceding quarter.

Encouraged by the number, the government hopes the GDP (Gross Domestic Product) growth for the full fiscal (2021-22) will be in line with the projection made in the Economic Survey and the Budget — that is, between 10.5 per cent and 11 per cent.

‘Gaining momentum’

Chief Economic Advisor KV Subramanian said that economic recovery is gathering momentum and expected it to sustain. “India is poised for stronger growth from structural reforms enabling efficiency and productivity, government’s capex (capital expenditure) push to enable private investment, financial sector clean-up and reforms and rapid inoculation that will help revive the contact-intensive service sector,” he said. He hoped growth will be back at pre-Covid levels the next fiscal year.

Though the second wave did impact various sectors, especially contact-based services sector, the overall impact was muted compared to the first wave. Still, the growth in the first quarter of this fiscal, at over 9 per cent, was lower than in the corresponding period of 2019-20. This indicates that because of the second wave, the economy lost in Q1 the ground it had recovered in the second half of the last fiscal.

DK Srivastava, Chief Policy Advisor with EY, said the overall real GDP growth in the first quarter could not make up for the large contraction in the corresponding period of the last fiscal, resulting in the real GDP shrinking by ₹3.3-lakh crore compared to the first quarter of FY 2019-20.

“The fiscal data also show that the Centre’s gross tax revenues have grown a sharp 83.1 per cent during the April-July period over the corresponding period of last fiscal and a growth of 29.1 per cent over 2019-20. This suggests significant policy room to uplift its demand and its contribution to output in the remaining part of the current fiscal year so as to ensure that the overall growth performance for 2021-22 does not fall below the growth expectation of 9.5 per cent, both by the RBI and the IMF,” he said.

Published on August 31, 2021

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