Ministry of Statistics and Programme Implementation (MoSPI) has released the GDP data for the second quarter (July, August and September) of the current financial year (2021-22).
What does the data say?
- Gross Domestic Product (GDP) – India’s GDP which measures economic activity from the demand side was 8.4% more than it was in the same quarter last year.
- Gross Value Added (GVA) – India’s GVA which measures economic activity from the supply side was 8.5% more than it was in the same quarter last year.
- The Indian economy clocked a healthy growth rate of 8.4 % in Q2 of FY 2021-22 due to increased vaccination and an uptick in agriculture, public administration and defence services sectors.
- High frequency indicators – All high-frequency indicators such as industrial production, vehicle sales, exports, port cargo and rail freight traffic, and GST e-way bills point to the economy growing faster in the second quarter.
- Gross Fixed Capital Formation (GFCF) – GFCF shows 1.5 % rise over July-September in the pre-pandemic year 2019-20.
Key takeaways from GDP data:
Takeaways from GVA data:
- GVA in better all sectors than it was in Q2 of last year except four key sectors that play a great part in creating fresh jobs: Mining & Quarrying, Construction, Services such as trade, hotels and financial services.
- Lower GVA levels would imply lower incomes for those employed in these sectors as well as lower employment opportunities in them.
- The manufacturing sector posted a growth of 5.5 % and the construction sector grew by 7.5 % in July-September than the same period last year.
- Agricultural growth increased to 4.5 % in the July-September quarter, while electricity, gas, water supply, and other utility services grew 8.9 % than the last year.
- In the services sector, the trade, hotels, transport sector grew at 8.2% in July-September as against a sharp 16.1 % contraction last year.
What are the policy implications?
- Although the economy is recovering from the recession it went into in Q2 of 2020, two data points put the recovery in perspective.
- India’s recovery is still emerging and a V-shaped recovery would have required the Q2 GDP and GVA to be much higher. So, it may take another two years to cross those levels.
- The GVA and GDP are around 3.5% and 4.5% respectively, in the first half of the FY 2021-22, which is lower than the first half-year of 2019.