The Indian economy is currently making headlines, setting new records in its growth trajectory. As revealed by data from the National Statistical Office (NSO), in April-June 2021, the economy grew at an impressive 20.1% compared to the same period last year. This significant turnaround comes after a period of economic contraction during a nationwide lockdown triggered by the Covid-19 pandemic.
Key Indicators of Economic Recovery
Despite a brutal second wave of the pandemic which peaked in April-May 2021, the first quarter signaled high growth rates. This surge can largely be attributed to the low base (-24.4%) of the first quarter of 2020-21. Such unprecedented growth coincides with the government’s prediction of a V-shaped recovery, made last year. However, it must be noted that while 20.1% growth may seem phenomenal, the GDP in the first quarter remains 9.2% lower than the corresponding period in the pre-Covid year of 2019-20.
Sector-Wise Breakdown of Economic Growth
Certain sectors played a pivotal role in pushing the economy forward during the April-June 2021 period. Manufacturing grew 49.63%, and construction surged ahead by 68.3%. However, the service sector continued to lag. Sectors such as ‘agriculture, forestry and fishing’ and ‘electricity, gas, water supply and other utility services’, displayed resilience, operating above the levels recorded in the pre-Covid year of 2019-20.
Understanding V-Shaped Economic Recovery
A V-shaped recovery is marked by a swift and sustained improvement in economic performance following a drastic decline. Generally, such recoveries are fueled by a tangible shift in economic activity resulting from rapid realignment of consumer demand and business investment spending.
About NSO
The NSO is the central statistical agency of the Government mandated under the Statistical Services Act 1980 under the Ministry of Statistics and Programme Implementation. It generates statistical information to guide policy, planning, monitoring and management decisions.
Reports & Indices by NSO
NSO produces various reports and indices such as the Index of Industrial Production (IIP), Consumer Price Index (CPI), Sustainable Development Goals National Indicator Framework Progress Report, Periodic Labour Force Survey (PLFS) and GDP data.
Measuring Total Output of Economy
The total output in an economy can be gauged in two ways: firstly, by measuring total demand through Gross Domestic Product (GDP), and secondly, by measuring total supply via Gross Value Added (GVA).
About GDP
GDP represents the total monetary value of final goods and services produced in a country during a given period. It helps us understand the functioning of the four engines of economic growth viz., Private Final Consumption Expenditure (C), Investment (I), Government Final Consumption Expenditure (G), and Net Exports (NX) (Exports-Imports). The formula for GDP is: GDP = C + I + G + NX.
About GVA
The GVA metric assesses how much value (in monetary terms) was added in various productive sectors of the economy. It provides valuable insights into the performance of individual sectors.
Difference Between GDP And GVA
While total output should ideally be the same when measuring Total Demand or Total Supply, the presence of government factors such as taxes and subsidies can cause discrepancies. GDP is derived by adding the tax revenues to the GVA and then subtracting subsidies provided by the government. Consequently, GDP will be higher than GVA if the government’s tax earnings outweigh its subsidies and vice versa.
