Going through the GDP numbers of April-June 2021 indicates that it is hard to read as the entire GDP is calculated on the basis of the 24.4% contraction which was last seen in 2020 in the same quarter during the Covid-19 lockdown. Even though the recent GDP numbers indicate V-shaped recovery, several sources believe that the recovery is not as smooth and strong as it is visible.
Figures That Tell A Different GDP Tale
If the actual numbers calculated for the quarter of April-June 2021 is considered, a 16.9% contraction is visible in comparison to the January-March 2021 quarter. The number indicates that the economy was once again hit hard but this time by the second wave of COVID-19. However, the hit was not as hard as the hit by the first lockdown due to COVID-19. Secondly, the actual number presented in April-June 2021 indicated that the figures presented were, in fact, 9.2% below in comparison to the April-June 2019 quarter which is a solid proof that the economy of India is shrinking. The figures captured in different news indicate that the economy of India will need to work hard to go back to what it was in 2019 and the only way possible to attain this is with the help of following a growing path. Even though the growth path looks easy to follow, it is not as easy to follow because recently the government has started using the supply-side approach and also other measures for the citizen to earn money like by conducting the Punjab State Lottery. The first four months of the financial year of 2021 indicates that even though India has seen a revenue surge, the expenditure of the government has contracted. This pattern in turn can have a negative impact on economic growth as private investment is yet to pick up on this trend. Even if the previous financial year is considered, the government’s capex sees a decline of 39.4% this year. The figure even reached an astonishing 62% when the figures of July 2019-20 is considered.
Other Worries Of Indian Economy
Other worries connected to the Indian economy include the Gross Value Added (GVA) in construction, trade, hotels, communication and transport services. Similarly, the GVA is lower even for the manufacturing sector in comparison to what was in 2019. Two sectors which managed to rise above the numbers presented in the quarter of April-June 2019 include agriculture and the electricity utilities. On the other hand, exports have presented a better picture when compared with other countries. However, the net trade still remains negative for the country because it is still highly reliant on imports. Another major worry of the Indian economy is that of private investment. One-third of India’s GDP comes from private investment and this is currently 17% lower in the April-June 2021 in comparison to the figures of two-years earlier. In fact, Indian Express has pointed out that this year, the private consumption in April-June is actually lower than the figures of 2017-18, i.e. four years earlier. The stagnancy which is visible since four years indicates that there was an overall reduction in the lower-income level. This worrying presents the citizen with a greater inequality.
Little attention has been given to private consumption which is considered as one of the biggest drivers of the GDP growth of India. Often the most overlooked picture when it comes to private consumption is that the pattern of it which is currently visible was also noticeable before the country was hit by Covid.
Consumer Sentiments Are Causing A Problem
Even though many economic indices have seen an improvement, the same cannot be said is true when the consumer sentiments are considered. Consumer sentiments are still low and it has simply refused to spring back. In 2020-21, the average household income has decreased by 14.9% and people are engaging in additional income sources like earning money through Dhankesari. However, if the values are seen in real terms, the real fall in average household income is calculated to have fallen by 20 per cent which is huge. With the government still focusing on the supply-side measures for economic growth, the demand crisis will still exist but it needs to be checked whether the economy will go down or rise up in the coming time. It is, however, expected that during the festive season, the consumer sentiments will increase compared to last year but still won’t match the pre-pandemic times.